Tuesday, 15 October 1985 The PRESIDENT (Senator the Hon. Douglas McClelland) took the chair at 2 p.m., and read prayers. The Clerk —Petitions have been lodged for presentation as follows: To the Honourable the President and members of the Senate in Parliament. The petition of the undersigned shows that because it will cause serious harm to the community, the Parliament will not legalise the possession, sale, hire, or supply of any publication or video tape, video disc, slide or any other recording from which a visual image can be produced, which displays degradation of any person, particularly women and children, or animals; scenes of explicit sexual relations showing genitalia detail; acts of violence and sex; sexual perversion such as sodomy, mutilation, child pornography, urolagnia, coprophilia, necrophilia, bestiality; or the use and effect of illicit drug taking; explicit fellatio and cunnilingus; explicit nudity including touching genitalia, erect penis. Your petitioners pray that the Senate, in Parliament assembled, will give this matter earnest consideration, and your petitioners, as in duty bound, will ever pray. by Senator Boswell (from 49 citizens). To the Honourable the President and members of the Senate in Parliament assembled. The petition of the undersigned shows: A concern for the continuing spread of pornographic material, especially video tapes, within the Australian community. Your petitioners request that the Senate, in Parliament assembled, should seek to have re-enacted the previous laws which banned the entry into Australia and the sale of hardcore pornography and violence in video and publication form. And your petitioners, as in duty bound, will ever pray. by Senator Boswell (from 39 citizens). To the Honourable President of the Senate and the senators in the Parliament assembled. We, the undersigned citizens of Queensland, do respectfully pray that the present concessional import duty as exists under By-Law BL8255510 be maintained and not lapse on June 30, 1985 as presently planned by the Australian Customs Service. This by-law has permitted goods under Item 19 to be imported at a 2% rate of duty and has greatly benefited the Veteran, Vintage and Old Car Movement in the restoration of vehicles of 30 years age or more. While many automobile parts are produced in Australia, it is impractical to suggest they could be used during restoration of most old cars. It is reprehensible that this action should occur without debate, consultation or fair warning. Your petitioners therefore humbly pray that the concessional rate of duty on old cars and parts be maintained. by Senator Boswell (from 50 citizens). To the Honourable the President and members of the Senate in Parliament assembled. The petition of the undersigned shows: That the proposed introduction of compulsory identification (ID) cards should be reconsidered and rejected because the system: (a) is not a cost-effective method of reducing tax evasion and social security fraud and, to the contrary, in the form proposed will facilitate such evasion and fraud; (b) will constitute an unwarranted infringement of individual privacy by the aggregation of a wide variety of personal information of a private nature; (c) will cause a further large and costly growth in the bureaucracy and burden on the taxpayers; and (d) cannot be guaranteed against misuse for purposes other than for which their introduction is stated to be intended and in fact provide the opportunity for blackmail and other forms of misuse. And your petitioners humbly pray that the problems which identification cards are intended to reduce should be attacked by other, more effective and less obnoxious methods. And your petitioners, as in duty bound, will ever pray. by Senator Peter Rae (from 22 citizens). To the Honourable the President and members of the Senate in Parliament assembled. We the undersigned citizens of the Commonwealth do humbly pray that the Commonwealth government 1. Uphold the principle that the seeds and cuttings of plants are a public resource and a common heritage to all and that accordingly seeds should be freely available to all, freely multipliable, able to be sold, exchanged, exported and imported by anyone who wishes. This is seen as a matter of national food security. 2. Recognise that plant breeding is a highly co-operative venture often involving private enterprise at the very last stages after basic seed collection, storage, and research has been publicly funded. 3. In view of the aforementioned paragraphs, recognise that any system giving `property' or ownership rights over seeds to individuals, organisations or enterprises is inappropriate and unjust. 4. Recognise that legislation establishing plant patenting schemes overseas has had serious adverse effects namely: i. a slowing-down of scientific information exchange and exchanges in basic plant breeding materials, that is, germ plasm, ii. subordination and/or curtailment of public breeding programmes, iii. farmer unrest at seed prices, iv. monopoly control of seed production and sales has passed into the hands of giant petrochemical and drug corporations also marketing crop chemicals, v. increased uniformity of crop varieties leading to a vulnerability to pest and disease attack. 5. Reject any proposal to legislate for any system such as the drafted Plant Variety Rights Act, which gives exclusive ownership rights over seeds to individuals, organisations or enterprises. And your petitioners, as in duty bound, will ever pray. by Senator Zakharov (from 43 citizens). To the Honourable the President and members of the Senate in Parliament assembled. The petition of the undersigned citizens of the Commonwealth of Australia respectfully showeth: That the Hawke Government's failure to correct the anomalies arising from the application of the assets test on pensioners, with the failure of the Australian Democrats to support Senator Messner's Bill to repeal the assets test, is causing unnecessary hardship for Australia's aged, particularly those living in rural areas. Your petitioners therefore humbly pray that the Hawke Government will itself take action to repeal its iniquitous and anomalous test. And your petitioners, as in duty bound, ever pray. by Senator Parer (from seven citizens). To the Honourable the President and members of the Senate in Parliament assembled. The petition of the undersigned respectfully showeth: That the Government did not honour its promise to consult with veterans before introducing the Repatriation Legislation Amendment Bill. Your petitioners most humbly pray that the Senate in Parliament assembled, should- Oppose any sections of the Veterans' Entitlements Bill which would have the effect of reducing veterans' benefits and particularly that section which seeks to change the onus of proof. And your petitioners, as in duty bound, will ever pray. by Senator Parer (from 76 citizens). To the Honourable the President and members of the Senate in the Parliament assembled. The petition of the undersigned shows: That human embryos deserve legal protection to enable the development of their full human potential. Your petitioners request that the Senate, in Parliament assembled, should: Pass Senator Harradine's Bill to prohibit experiments involving the use of human embryos created by in vitro fertilization. And your petitioners, as in duty bound, will ever pray. by Senators Boswell (from 34 citizens) and Parer (from 1,362 citizens). To the Honourable President and members of the Senate in Parliament assembled. The petition of the undersigned respectfully shows: That we urge that the Australian Government express its concern to Indonesia over consistent reports of widespread human rights violations in East Timor, as detailed by Amnesty International, and that the Indonesian Government be urged to take steps to prevent killings, torture and arbitrary arrest and imprisonment, as has been recently reported. We would further humbly request that the Australian Government use its voice at the United Nations to lobby strongly for the reinsertion of East Timor to the Human Rights Commission Agenda; that the above human rights concerns be raised at the General Assembly when the Decolonization Committee makes its report; and that steps be taken to initiate UN conducted negotiations between Indonesia, Portugal and representatives of the East Timorese people, including Fretilin. And your petitioners, as in duty bound, will ever pray. by Senator Zakharov (from 59 citizens). Petitions received. Senator WALSH(Western Australia-Minister for Finance) —I give notice that, on the next day of sitting, I shall move: That leave be given to introduce a Bill for an Act relating to employees of the Commonwealth. Senator GARETH EVANS(Victoria-Minister for Resources and Energy) —I give notice that, on the next day of sitting, I shall move: That leave be given to introduce a Bill for an Act to amend the Pipeline Authority Act 1973. Senator WALSH(Western Australia-Minister for Finance) —I table papers in accordance with the list circulated to honourable senators. With the concurrence of the Senate, I incorporate the list in Hansard. Leave granted. The list read as follows- 1. Mount Allan Land Claim-report by the Aboriginal Land Commissioner. 2. Gurindji Land Claim to Daguragu Station-further report by the Aboriginal Land Commissioner. 3. Qantas Airways Limited-annual report 1984-85. 4. Department of Treasury-annual report 1984-85. 5. Commonwealth Grants Commission-52nd report 1985-pursuant to section 25 of the Commonwealth Grants Commission Act 1973. 6. Insurance Commissioner-annual report 1984-85-pursuant to section 125 of the Insurance Act 1973. Senator DURACK —I direct my question to the Minister representing the Minister for Foreign Affairs. I refer the Minister to the Acting Prime Minister's most welcome statement yesterday that he would arrange for a message of support to be sent to the United States Government indicating Australia's support for action taken by the United States last Friday against the suspected hijackers of the Achille Lauro. Has this message of support been sent? Will the Minister advise the Senate as to the terms of the message? Senator GARETH EVANS —The message of support was sent this morning by the Acting Prime Minister, Mr Bowen, to the President of the United States and I have the text of it here, as follows: Dear Mr President The Government of Australia understands and shares the deep concern of the Government of the USA at the acts of the terrorists who illegally seized the ``Achille Lauro'' and murdered an American passenger. It agrees with, and has complete sympathy with, the declaration of the Government of the USA that terrorists should be proceeded against according to the established legal processes and that all countries in the international community should meet their proper obligations in this process. Australia certainly will meet its responsibilities in this respect and we have conveyed this commitment to your Government. The Government of Australia understands the concerns of the Government of the USA to make these terrorists subject to legal accountability. This incident is the latest in a cycle of violence and counter-violence in the Middle East which will not stop until the underlying causes of the Middle East dispute are addressed and resolved. Senator MAGUIRE —I refer the Minister representing the Treasurer to the Government's taxation package and its potential benefits for lower income Australians. How will the lowest marginal personal income tax rate as of 1 September next year compare with the lowest marginal tax rate in the final year of the Fraser-Howard Government? How many additional Australian taxpayers will be freed from a tax liability in the 1986-87 financial year as a result of the rise in the tax free threshold from $4,595 to $5,100? Senator WALSH —When the last Liberal Government came to office the lowest marginal tax rate was 20 per cent, or 20c in the dollar. It was then increased by the Liberal Party to 32c in the dollar in the 1977 Budget and was subsequently reduced to 30c. The lowest marginal rate on 1 September 1986 will be 24c in the dollar, although I should lodge the caveat that that of course assumes that the tax reform package which the Government has presented will not be sabotaged by the Liberal Party in the Senate. If the package is sabotaged in the Senate it will certainly not be possible to proceed with the proposed reductions in marginal income tax rates and the tax cuts which would go with them. So the provisional answer is that the lowest marginal rate will be 24c in the dollar but that is conditional upon the Government's tax reform package not being sabotaged by that coalition of narrow vested interests which is represented by the Liberal Party. As to the number of taxpayers who will be freed from any tax liability in the next financial year as a result of the increase in that threshold of some $500, from $4,595 to $5,100, I am advised that approximately an additional 130,000 taxpayers will be freed of any income tax obligation because of that change. Senator PARER —Does the Minister representing the Treasurer agree that yesterday's disturbing balance of trade figures underline the need for a continuing tight money policy and high interest rates to maintain support for the Australian dollar? Does he further agree that every home buyer is paying the price for this tight money policy through mortgage increases, such as the $60 a month increase in repayments on a $40,000 bank loan since the start of the year? How much longer will home buyers have to wait for the lower interest rates promised by the Prime Minister and the Treasurer, and more recently by the Minister for Housing and Construction? Senator WALSH —If the balance of payments figures released yesterday had been unexpected the possibilities which Senator Parer foresees could well materialise. They were not, however, unexpected by the Government; nor should they have been unexpected by anybody who had taken the trouble to read the 1985-86 Budget Papers. It was forecast in the Budget Papers that the current account deficit would increase somewhat before the full effect of the devaluation which took place earlier this year was felt but that it would then turn around and decline. It is true that interest rates are high by historical Australian standards; indeed, higher than they may have been at any time prior to the mid to late 1970s. They are, however, substantially lower than they were in the peak mid-1982 period under the previous Government when Mr Howard was Treasurer when, for example, 90-day commercial bills required an interest rate payment of 22 per cent in April 1982. It is also correct that-- Senator Short —That is not true in real terms. Senator WALSH —Somebody said something about real terms. When the Liberal Party talks about real terms it is drawing attention to the extraordinarily high levels of inflation over which Mr Howard also presided. The PRESIDENT —Order! I ask the Minister to ignore the interjection and get on to answering Senator Parer. Senator WALSH —Certainly, Mr President. Nobody in this Government I can think of has attempted to hide the fact that Australia has a current account deficit problem. The devaluation of the dollar was an overdue market response to that fact, but it ought to be noted that, although the current account deficit as a proportion of gross domestic product was high in the last financial year and is expected to fall only marginally in this financial year, it is nowhere near as high as the record level in 1981-82 when Mr Howard was Treasurer, when the current account deficit as a proportion of GDP was 6 per cent. That was the extent of our trade, goods and services deficit with the rest of the world, a figure considerably higher than the 4.9 per cent recorded in 1984-85 or the 4.6 per cent anticipated for 1985-86. Senator PARER —I ask a supplementary question. Does the Minister have a forecast figure for the trade deficit? He said that from reading the Budget figures it could be anticipated at this stage. Senator WALSH —I could work it out if I could remember what the dollar GDP forecast is, but it is 4.6 per cent of whatever that is. Senator FOREMAN —My question is directed to the Minister for Veterans' Affairs. Does the Government's decision to extend repatriation benefits to personnel who served in Vietnam on supply and escort ships such as the HMAS Sydney also mean that such persons will be eligible for defence service home loans? Senator GIETZELT —The answer to Senator Foreman's question is yes. The reason that the Government agreed to include in the Veterans' Entitlements Bill access to a range of benefits provided by my Department was to recognise those persons who served on the HMAS Sydney and on several of the support boats which were not allotted for duty by the defence establishment back in the years of the Vietnam war. Those persons will now be eligible for defence service home benefits as though they had been allotted for duty outside Australia at that time. I remind Senator Foreman that about two years ago I made a public statement supporting the view that those persons involved in that exercise should be treated in the same way as those who actually served in Vietnam. However, the Department of Defence at that time did not agree with that view. But finally the Government was persuaded to make available the repatriation benefits as well as access to defence service homes. However, the benefits will not be available until enabling legislation has been enacted by the Parliament. The proposed Veterans' Entitlements Bill will be amended to cover this aspect. It is estimated that about 2,000 additional persons will now be eligible to apply for the loan of up to 25 per cent under the scheme to assist them to acquire a home. As the interest rate is approximately 6.8 per cent, it is pretty clear that the Government has made a very acceptable concession in agreeing to include those who served on those support ships during the Vietnam war among those eligible for loans under this housing scheme. Senator VIGOR —I ask my question of the Minister representing the Treasurer. In the light of the trade figures announced yesterday which showed a deterioration in the September balance of trade-exports fell by 7 per cent and imports rose by 3 per cent in seasonally adjusted terms-will the Minister explain how he believes Australia's disastrous current account deterioration will be reversed in the future, given that the devaluation is not having the anticipated effect of narrowing our trade deficit? Since exports decreased by 7 per cent in seasonally adjusted terms, does the Minister believe that more assistance should now be given to our exporters, rather than the $80m cut in assistance achieved by the export market development grants scheme amendment passed in the Senate last week? Given the reduction in the value of the dollar which is likely to follow these trade figures, will the Government insulate home buyers from the consequent increases in domestic interest rates by maintaining the ceiling on home interest mortgages? Senator WALSH —When virtually the same question was asked a couple of minutes ago Senator Vigor had already given me notice of this question. I did not expect that he would be deterred from asking it because essentially the same question had been asked immediately beforehand, so I saved some of the answer for this one. I am not sure what a home interest mortgage is, so I find it a bit difficult to answer the last part of the question. Perhaps I can answer in more general terms. In regard to the external current account deficit, there are two ways in which that could conceivably be closed-by increasing exports or by reducing imports. The Government announced in May a decision effectively to increase exports by increasing the charges applied to non-Australian Development Assistance Bureau foreign students in Australian tertiary institutions. I understand that the Australian Democrats will oppose that Government policy which would make some contribution, albeit small, to closing that current account deficit which so concerns Senator Vigor. Senator Peter Baume —How much con- tribution? Senator WALSH —This year it is about $10m. In regard to the September figures, the decline in exports in September needs to be seen in the context of the figures for the previous two months. July exports appeared to be adversely affected by industrial disputes and therefore, not surprisingly, there was a very large increase in July over August. The September result, in seasonally adjusted terms, represents a 4.4 per cent increase over the average for July and August and in this regard could be seen as a healthy result. I do not think there is much more I can say other than to refer Senator Vigor to the answer which I gave Senator Parer. In response to the last part of the question, the Treasurer has already stated that the Government will be maintaining the ceiling of 13 1/2 per cent for all banks on interest which may be charged on housing loans, usually secured by a mortgage against the property. Senator MORRIS —Is the Minister for Education aware that the tourist and leisure industries in Australia offer job opportunities for those who are suitably trained and possessing the necessary skills for the industries? Is she further aware that the college of tertiary and further education at Ryde in Sydney provides courses for the hospitality and tourist industries? In view of the Government's commitment to the development of these industries, I ask: Will the Minister give further consideration to a request that has been made for Commonwealth funding for the construction of a resources and library building at the Ryde college so that students in those subjects are not denied proper training for their future employment? Senator RYAN —The Government is very well aware of the growth in the tourism and entertainment industries generally. As we have a strategy of trying to adapt higher education expansion to realities in the employment market, favourable consideration has been given to a number of tourism and hospitality projects, not only in New South Wales but also throughout Australia. In North Queensland, for example, new facilities have been funded. It is a part of our policy to ensure that scarce capital resources are devoted to the development of facilities in which young people can be trained for real jobs that exist in the labour market. I do not have any details about the particular project raised by Senator Morris's question, but I am sure that as it is in one of the areas to which we are giving high priority-that is, areas relating closely to the labour market-its application will be sympathetically considered, first of all by the co-ordinating body for higher education in New South Wales and, subsequently, by the Tertiary Education Commission. Senator CHANEY —My question, which is addressed to the Minister representing the Minister for Foreign Affairs, follows the answer he gave to the question asked by Senator Durack a few minutes ago. In light of the message which has been sent by the Acting Prime Minister, Mr Bowen, to the President of the United States, why has the Government backtracked on his firm promise to give a message of support to the United States for the action that it took last Friday? Senator GARETH EVANS —The Government does not accept that characterisation of the situation. The message that was sent by the Acting Prime Minister was appropriate in all the circumstances and quite consistent with the thrust of his answer given in the House of Representatives yesterday. Senator CHANEY —Mr President, I ask a supplementary question. Does the Minister agree that Mr Bowen said that he would arrange for a message to be sent, which was to be a message of support for the action taken by the United States last Friday against the suspected highjackers? Can the Minister point to any words in the statement which he read which amount to a statement of support for the action taken by the United States last Friday? Senator GARETH EVANS —I repeat that the substance of Mr Bowen's message to the President of the United States is quite consistent with what he said in the very limited response that he gave yesterday in the House of Representatives. Senator BOLKUS —My question is also directed to the Minister representing the Minister for Foreign Affairs. Is it a fact that Rudolfo Sequel, the head of the Copper Miners Union in Chile, and Manuel Bustos, the head of the Construction Workers Union in that country-respectively, the President and Vice-President of the Chilean trade union movement-were arrested about four weeks ago on the day of national protest in that country? Is it a fact that these people are still under detention and have been deprived of basic civil liberties? Will the Australian Government protest at the treatment of these two prominent Christian Democrat trade unionists and other people so detained? Senator GARETH EVANS —The question is a timely one as the Government has been following this case with concerned interest. A number of reports have been provided by our embassy in Santiago, the most recent of which was received just a few days ago on 10 October. Reports indicate that Rudolfo Sequel and Manuel Bustos, together with over 80 other persons, face charges arising from anti-government demonstrations that began on 4 September. Many of those arrested remain in detention. Sequel and Bustos have been charged with instigating the demonstrations during which 12 people died. Under Chilean state security laws, those who call for demonstrations are held responsible for the consequences. The Australian Government has repeatedly called on the Chilean Government to re-establish dialogue with the political opposition and resume respect for human rights. These latest mass arrests indicate that the Chilean Government is not prepared for an early restoration of democratic institutions. This can only lead to further cycles of demonstrations and repressive countermeasures. The Australian embassy in Santiago was requested last week to convey to the Chilean authorities Australia's deep concern at the recent arrests and to urge them to respect internationally accepted standards of human rights. Senator COLLARD —My question is addressed to the Minister representing the Treasurer. It follows the admission by Senator Button last week that the Government took its final decision on taxing private use of company cars in the absence of a specific study of the effects of the tax on employment in the motor vehicle industry. In light of the major job losses which have already occurred in the restaurant and catering industry, did the Cabinet have available to it an estimate of employment consequences of ending tax deductibility of entertainment expenses when it made that decision? If so, what was it? If not, does the Minister agree that neither he nor the Treasurer is in any position to contest estimates by reputable industry organisations and consultants that more than 10,000 jobs are likely to disappear in the restaurant and catering industry because of the tax changes? Senator WALSH —The Opposition continues, either for political reasons or because of intellectual inadequacy, to fail to appreciate that there will be offsetting jobs generated somewhere else if there is a decline in any particular industry because less money is spent on the product or the service of that industry. The money which the Opposition claims will no longer be spent in the restaurant industry will be spent somewhere else. It might well be spent in an area where it will do more for the long term health of the economy than the free lunch will do. I must say again that I find it quite astounding that a Liberal Party which attempts to present itself as a puritanical economic developer with a rather Calvinistic attitude to economic development should be subscribing to the free lunch led economic recovery. It is one of those amazing contradictions in which the Liberal Party abounds. Senator Collard referred to reputable industry organisations which have made estimates and to jobs which have been lost already and so on. When he can produce some reliable statistics about changes in employment, he perhaps will be taken seriously. However, while he just makes wild assertions he should be treated with contempt. The so-called reputable industry organisations, consultants or whatever are, of course, hired guns acting for a lobby group. Even if they were not, however, it is instructive and particularly instructive for Senator Messner to remember that an independent organisation, the Bureau of Agricultural Economics-or more accurately one officer of the BAE-a long time ago did a study of the likely effects of a sales tax on wine. Those conclusions were uncritically picked up 20 years later and exaggerated by Senator Messner and his colleagues. They forecast that as a result of a 10 per cent wholesale sales tax on wine, wine sales would fall by 14 per cent. The PRESIDENT —Order! The Minister is debating the question now. I suggest that he come back to the question. Senator WALSH —Certainly, Mr President. The point, however, is that these wild allegations are made by vested interest groups; they were made on that issue and they continue to be made today. The fact is that the Government could have done a pseudo-scientific study on the likely effects of the end of the tax free lunch on employment in the restaurant industry and the end of tax free cars on employment in the motor vehicle industry. Any such pseudo-scientific study would have been incomplete in its macro-economic effects unless it also took account of the employment generating consequences of the expenditure diverted from those industries, if there was any, to other industries. Senator COOK —Has the Minister for Resources and Energy seen the Australian Financial Review article today claiming that export control guidelines for a number of commodities, notably coal, are to be changed? Can the Minister advise the Senate whether the article is accurate? If it is not, what are the facts? Senator GARETH EVANS —I have had occasion to check out with the office of the Minister for Trade the substance of that story which has caused a degree of concern in the industry, not least on the employees' side. It is quite incorrectly alleged in the Australian Financial Review that substantial changes are planned to the administrative guidelines under which companies are required to seek approval for their prices before concluding export sales contracts. It is a fact that the operation of export controls for all commodities has been under review by the Minister for Trade since the begining of the year but no specific changes of the kind mentioned in the Australian Financial Review article to the arrangements in relation to coal are presently under consideration. In particular, the two-tier proposal outlined in the Australian Financial Review story is quite incorrect. I would not expect the Prime Minister in his speech to the Business Council of Australia to do any more than simply note that discussions have been held by the Minister for Trade with the industry and unions in relation to the existing export control arrangements on coal and that these discussions will be continuing. I simply conclude by saying that the objectives of the present control system are being fully implemented at the moment. Senator WALTERS —Does the Minister representing the Minister for Foreign Affairs stand by his answer to Senator Aulich yesterday when he said that Mr Robson, MHA, `visited the Australian Embassy in Berne and handed in a plastic container for return to Australia' and that `Mr Robson assured the officers in Berne that it contained documentary material relating to a European Management Forum symposium he had attended at Davos'? Is the Minister aware that Mr Robson has denied having been at Berne at all last year and that the Australian officials at Davos were aware of the complete contents of the briefcase to be sent back to Australia? Does the Minister now believe he was wrong and has consequently misled the Senate? Senator GARETH EVANS —In the light of Mr Robson's statement on this matter, which Senator Walters read into the record in the adjournment debate last night, this morning I sought further clarification of this issue and in particular careful analysis of my original briefing note to ensure that no misstatements of fact had been made. There was, in fact, one misstatement of fact which did turn up as a result of that analysis and that was the question of the Tasmanian Minister's actual presence in Berne at the time that was suggested to be the case. That had been confused in the mind of whoever it was who wrote the thing with a visit the previous year. But everything else is, in fact, perfectly accurate. A number of statements were made by Mr Robson last night which have now been quite specifically countered by the officer in the Department of Foreign Affairs who was the Deputy Head of Mission at the Australian Embassy in Berne at the relevant time and who was personally responsible for the course of events to which I adverted in replying to Senator Aulich yesterday. I think that it would clarify the matter for all concerned were I to seek leave to incorporate in Hansard the text of the statement made to me. Senator Walters —No, read it. Senator GARETH EVANS —I think that the honourable senator might be a little embarrassed by it and that Mr Robson might be embarrassed by it. The PRESIDENT —Senator Evans, do you seek leave to incorporate the statement? Senator GARETH EVANS —I sought leave to incorporate it. I am happy to read it if the Opposition wants me to do so. Senator Chaney —May I intervene? There is a recommendation of the Standing Orders Committee that when an item is to be incorporated it be shown to the other side for consideration. The PRESIDENT —Order! Senator Evans has sought leave to incorporate a document in Hansard. Is leave granted? Leave granted. The statement read as follows- USE OF DIPLOMATIC BAG BY MR NEIL ROBSON I served as Deputy Head of Mission at the Australian Embassy in Berne from May 1981 to July 1984. In that capacity I was involved in efforts by the Embassy to give assistance to Mr Neil Robson, both when he attended the European Management Forum Symposium at Davos early in 1984, and in the course of a previous visit to Switzerland aimed at promoting investment in Tasmania. I have seen the text of Mr Robson's statement, read to the Senate on 14 October 1985 by Senator Walters. I can make the following comments. It is correct that officers of the Department of Foreign Affairs (specifically, Ambassador Hutton and myself) attempted to be helpful to Mr Robson and other members of the Tasmanian delegation, including the Premier, Mr Gray. Assistance was also extended to representatives of the Australian private sector attending the Symposium. The primary role of Embassy staff was to support the Minister for Industry and Commerce, Senator Button, who warmly approved of our efforts to promote the interests of all Australians present in Davos, consistent with the aim of projecting a vigorous and positive image of Australia. There were no Australian Trade Commission staff in Davos. As far as I am aware, Mr Robson did not visit the Australian Embassy in Berne in 1984. In the general framework of the assistance we provided to members of the Tasmanian delegation, I was asked to accept a briefcase which, I was informed, contained only symposium documentation which Mr Robson did not wish to carry with him on the post-Davos legs of his trip. I was asked to have the bag sent to Tasmania via the diplomatic bag. The briefcase was sealed and addressed when given to me. I was not present when it was packed, I did not provide tape to seal it, and I was not informed that it contained personal items. I agreed to arrange for its dispatch to Australia in the belief that it contained only material which fell within the guidelines laid down by the Department of Foreign Affairs on the use of diplomatic bags. I would not have accepted the briefcase had I been informed that it contained material of a non-official nature. The Minister's statement to me concerning the contents of the briefcase (i.e. symposium documentation only) seemed an acceptable guarantee in this regard. While the Minister may not have been aware of ``the method the officers would use to send the briefcase back to Australia'', he requested that it be sent by diplomatic bag and would, moveover, have been aware that we would not have taken it to a local post office. Since he could have availed himself of this means of dispatch without any assistance from the Embassy. R. S. DESIATNIK Diplomatic Security Section 15 October 1985 Senator CHILDS —Is the Minister for Veterans' Affairs aware of a particularly ugly scam which was exposed recently on the Australian Broadcasting Corporation program The Investigators, involving the placing of unsolicited advertisements in bogus or legitimate small-circulation magazines, after which the company concerned is billed at an outrageous sum for a gratuitous advertisement? Can the Minister comment on allegations that local ex-service organisations are unwitting accomplices in this scam through their club magazines? Senator GIETZELT —Yes, I am aware of the allegations. They have been brought to my attention by Mr Ron Edwards, whom I knew in New South Wales and who is now the Australian Labor Party member for the Western Australian seat of Stirling. Mr Edwards became concerned and raised the matter with me as a result of complaints made by four businessmen in his electorate who were being ripped off by this rather odious practice. I understand that this scam is called blowing because it is conducted over the blower. It can involve either bogus magazines or, as in these cases that have been brought to my attention, genuine but small circulation specialist publications. The first step is for the perpetrator to offer to produce the magazine free in return for the advertising revenue he can generate. Then he inserts advertisements for companies selected at random and bills them for the advertisements, working on the assumption that they will pay in the belief that someone in their organisation ordered the advertisement. That is what brought the complaints to Mr Edwards. Mr Edwards has alerted me to the fact that two Victorian ex-service groups have been unwittingly drawn into this duplicity, the Melbourne sub-branch of the Returned Services League of Australia, through its magazine Duckboard, and the Cheltenham-Moorabbin Ex-Services Club, through its magazine Target. Mr Edwards has calculated that the scam would generate potential revenue for the scheme's promoters of about $20,000 per issue, assuming everyone paid up on demand. I have checked the matter out and I find that the promoters are two Victorian companies, Hilton Publications of 695 Burke Road, Camberwell, and Esquire Publications of Forest Hill Centre. These two organisations are almost certainly run by the same people, in particular one Alec Mackenzie, who has answered the phone on the numbers of both of these companies. Senators can get some idea of the extent of this rip-off by examining many of the advertisements in these magazines, which are nearly all for small businesses. When one considers that they are publications with a limited circulation in suburbs of Melbourne and have advertised the Afro West Mining Co. Ltd in Perth, Narellan Kitchens in Campbelltown, New South Wales, a tile supplier in Queensland, Reuter's Butchery at Goondiwindi, Queensland, an exporter of frozen food in Gunnedah, New South Wales, Spectacles and Fashion in Perth, Ron Jachmann, manufacturers of silos and sheds in South Australia, and Shell Service Station, Manuka, in the Australian Capital Territory, one gets some idea of the lack of any relationship between the circulation and the advertisements. I draw attention to the fact that not only is the whole process somewhat fraudulent, but there is also a tax deductibility consideration for the companies concerned. To that extent it is a practice that ought certainly to be brought to the attention of the organisations. I intend to write to the major ex-service organisations and draw attention to what has taken place in the hope that this dubious practice may be brought to an end. Senator SANDERS —I direct my question to the Minister representing the Minister for Aviation. Is the Department of Aviation intending to cut funds for meteorological services, which will lead to the closure of weather service offices at Launceston, Hobart, Port Hedland, Canberra, Tamworth, Mount Isa, Alice Springs, Cairns and Rockhampton? Will the Hobart flight service station be closed? If other flight service stations are to be closed, where are they? Is it also a fact that in spite of Tasmania's notoriously changeable climate and the presence of large numbers of mainland pilots touring the State with no local knowledge of weather patterns, there will be no aviation weather offices remaining in Tasmania? If so, what steps will the Department of Aviation take to rectify the unsafe condition it will create by the closure of the weather and flight service offices? Senator GIETZELT —Senator Sanders was good enough to alert me to the fact that this question would be asked, and I did refer the matter then to the Department of Aviation to check out what the exact circumstances were. He is referring to closure of weather service stations at 10 particular spots in Tasmania and parts of the mainland. Consequently, it is a matter of some concern to him, as indeed it would be to many citizens. I have requested that information and I am not yet in a position to supply him with an answer from the Department. I would be pleased if he would let me take the matter on notice and I will get an early reply for him. Senator VALLENTINE —My question is directed to the Minister representing the Minister for Defence. In answer to a question last week on the visits to Australia by United States warships the Minister said: Information concerning the proposed visits is to be declassified some 10 days prior to the ship arrival and a public announcement of such visits is issued. In view of this statement, first, will the Minister please state on what dates public announcements were made regarding the following warships visits: USS Carl Vinson, which visited Fremantle on 19 April 1985; USS Constellation, which visited Fremantle on 19 July 1985; USS Texas, which visited Hobart on 16 April 1985; USS Indianapolis, which visited Stirling on 30 January 1985; USS Buchanan, which visited Sydney on 5 March 1985; USS Brooke, which visited Sydney on 30 September 1985; and USS Pogy, which visited Darwin on 11 March 1985? Secondly, will the Minister please tell me who is responsible for making such announcements? Senator GARETH EVANS —I just happen to have with me the information sought by the honourable senator. Although I keep asking her to put these questions on notice, she seems to want to ask them in the chamber, so here we go. While security requirements permit the declassification of information on visiting US ships some 10 days prior to the visit, the subsequent issuing of a public announcement depends on completion of the approval process. Except in the case of major exercises or visits which are of unusual significance, the responsibility for arranging these public announcements rests with the local Royal Australian Navy commander. As can be seen from the list which I will read in a moment, naval commanders often seek assistance from other authorities who have better facilities for issuing news releases. The details sought by Senator Vallentine are as follows: The visit of USS Carl Vinson was announced by the Naval Officer Commanding Western Australia by Press release on 17 April 1985 and was also announced by the US Consulate in Perth; the visit of USS Constellation was announced by the Naval Officer Commanding Western Australia by Press release on 16 July 1985 and was also announced by the US Consulate in Perth; the visit of USS Texas was announced by the US Consulate in Melbourne at the request of the Naval Officer Commanding Tasmania on 12 April 1985; the visit of USS Indianapolis was announced by the Naval Officer Commanding Western Australia by Press release on 28 January 1985 and was also announced by the United States Consulate in Perth; the visit of the USS Buchanan was announced by the Naval Support Commander by Press release in Sydney on 1 March 1985 and this visit was also foreshadowed in the Minister for Defence's news release which announced exercise Flying Fish on 21 February 1985; the visit of USS Brooke was announced by the Naval Support Commander by Press release in Sydney on 30 September 1985-it should be noted that the USS Brooke arrived in Sydney on 1 October, not 30 September as was stated in Senator Vallentine's question; and finally, the visit of USS Pogy was announced by the Chief Minister of the Northern Territory at the request of the Naval Officer Commanding Northern Australia on 8 March 1985. Senator CRICHTON-BROWNE —My question is directed to the Minister representing the Minister for Aboriginal Affairs. I refer Senator Ryan to Budget Paper No. 1 1985-86 which, on page 233, refers to a reduction in outlays for land development projects being a result of a one-off grant in 1984-85 to Western Australia for the purchase of four pastoral property leases. I ask: Was it conditional, and is it intended for the Aboriginal groups to purchase one or more of the restructured holdings following the Commonwealth's assistance to the Western Australian Government to purchase these pastoral leases? Senator RYAN —I have some information to assist Senator Crichton-Browne. It is the case that the Government has made a one-off grant of $6m to Western Australia to assist with the restructuring of the pastoral industry in the Kimberleys. I am informed that the Western Australian Government has set up a steering committee comprising representatives of all relevant groups, including Aborigines, to advise on the restructuring. It is anticipated that the Aboriginal people will then be able to participate in the redeveloped Kimberleys pastoral region. I do not have any more specific information than that but I can refer the matter to the Minister for Aboriginal Affairs to see whether there is any more specific information in answer to Senator Crichton-Browne's query. Senator CRICHTON-BROWNE —Mr President, I ask a supplementary question. I understood Senator Ryan to be saying that the money was provided, in part, to allow the Aboriginal community to purchase one of the properties. That was the logical conclusion I had drawn from the Budget Papers. I ask: Why does there appear to be conflict between that answer and an answer which Mr Burke gave in the State Parliament in which he was quite specific in saying-I need not quote him-that the money was not granted conditional upon a pastoral lease being granted or that it was not in any way intended that a pastoral lease would be granted to the Aboriginal community? Senator RYAN —The information I just gave, on behalf of the Minister for Aboriginal Affairs, to Senator Crichton-Browne did not contain any specific reference to the purchase of a pastoral property by an Aboriginal community. I do not know whether that is the intention. I repeat for Senator Crichton-Browne's benefit the information I have available which is that our Government has made a one-off grant of $6m to Western Australia to assist with the restructuring of the pastoral industry in the Kimberleys. I do not know the details of how that restructuring will be implemented. I am able to inform Senator Crichton-Browne that the Western Australian Government has set up a steering committee, comprising representatives of all the relevant groups, including Aborigines, to advise on the restructing. It is anticipated that Aboriginal people will be able to participate in the redeveloped pastoral industry. What mode their participation will take, whether it will be by the management of a pastoral property or by working on it in some way, I do not know. I will refer that matter to Mr Holding for further information. Senator ROBERTSON —Has the attention of the Minister representing the Minister for Aboriginal Affairs been drawn to an article in today's Australian which states that according to land rights author, Mr Peter English, the handover of the Ayers Rock title was going to the `wrong tribe'? Will the Minister inform the Senate as to the accuracy of the article and Mr English's claim? Senator RYAN —My attention was drawn to that article and I have some information in relation to it. I think the first point that should be made clear to honourable senators is that the book referred to in the article in the Australian by Mr English-I am advised that this is not his real name but a pseudonym-Land Rights, Birth Rights-The Great Australian Hoax, is published by Veritas publishing company, the same company that publishes the notorious Red over Black by Geoff McDonald which is a publication widely and enthusiastically distributed by the racist organisation known as the League of Rights. As to the accuracy of the claims made by the so-called Mr English, honourable senators should know that the Mutitjulu Community Incorporated, which has been said erroneously by the Opposition and in some media coverage, such as the article in today's Australian, to be the recipient of the grant of the title will not receive title to the park. Only land trusts can hold title to land and the Mutitjulu Community Incorporated is not a land trust. For those who remain ignorant-some appear to do so deliberately-there is a waterhole on the south side of Uluru which is named Mutitjulu. When it was necessary to form an incorporated body to receive financial assistance for the community at Uluru, the word `Mutitjulu' was chosen for the name of that body. Under the provisions of the Aboriginal Land Rights (Northern Territory) Act a land trust has been established to hold title to the park. The name of that land trust is the Uluru-Katatjuta Aboriginal Land Trust. Its function as a land trust is to hold title to the land for the benefit of all Aboriginals entitled by Aboriginal tradition to the use or occupation of the land concerned. That means that the benefits of the title extend to a wider class of Aboriginal people than those said to be the traditional owners. The benefits extend to all Aboriginal people who have traditional rights in respect of that land. The question of traditional ownership in respect of Uluru National Park was addressed by the then Aboriginal Land Commissioner, Mr Justice Toohey, in his report on Uluru (Ayers Rock) National Park and Lake Amadeus-Luritja land claim. While Mr Justice Toohey found the park to be unavailable for claim under the provisions of the Act he noted that two of the estates comprised in the remaining land available for claim had their hearts in the park. These two estates were Uluru and Katatjuta and Mr Justice Toohey listed no fewer than 104 and 57 traditional owners respectively. Senator JESSOP —Has the Minister representing the Minister for Foreign Affairs read statements reported in the South Australian Sunday Mail and other media as having been made by one Ali Kazak who describes himself as the Palestine Liberation Organisation's spokesman in Australia? Is he aware that Mr Ali Kazak reportedly warned that Australians could be targets for Arab extremists and cited the fact that two Austrians were earmarked for execution by the hijackers of the Achille Lauro in the belief that they were Australians? Under what arrangements is this gentleman permitted to live in Australia? Is he a permanent resident? Is he being offered or afforded de facto diplomatic status? Further, has the Government made any inquiries with respect to this gentleman and his alleged threats? If not, will the Government take action to make inquiries and deal with him if he is not a permanent resident of Australia? Senator GARETH EVANS —The situation is that Mr Kazak is not recognised by the Government as a Palestine Liberation Organisation representative and his views are simply those of an Australian citizen. The Australian Government has received no suggestion from official PLO sources that the views expressed by Mr Kazak in the newspaper article reflect official PLO thinking. To the extent that the reported statements of Mr Kazak do give rise to some concern, as they have in some quarters, I simply make the point that has been made publicly since by Mr Young, the Special Minister of State, who is responsible for the Australian Federal Police and for Government activities in this area generally-that Australia has an effective national counter terrorist capability, developed through co-operation between Federal and State governments, and a national anti terrorist plan has been prepared to ensure a co-ordinated response to an incident and provide for effective crisis management should that circumstance ever arise. Equally, we have a very well developed intelligence exchange system with many other countries on the subject of terrorism and, of course, we have domestic arrangements in place which keep the Government very well informed of what might be likely to occur in this area. So I believe I can say with some conviction on behalf of the Government that there is no ground for particular concern arising out of the reported statements to which the honourable senator has referred. Senator COLSTON —My question, which I direct to the Minister representing the Minister for Employment and Industrial Relations, relates to the accord between the Government and the Australian Council of Trade Unions. Has the Minister's attention been drawn to recent criticisms of the accord? Is the Minister satisfied that, with the implementation of provisions of the accord, under this Government Australia's employment picture is improving and will continue to improve? Senator WALSH —I did notice in last Saturday's Australian that the honourable member for Tangney, Mr Shack, had a polemic about the accord and what he claimed were the assorted defects of the accord or, rather, the results which the accord delivered. After reading that polemic I can understand why the new Leader of the Opposition made him the shadow Minister for Education and, certainly, why he moved him from employment and industrial relations. Indeed, this is probably one of the few bull's eyes that the present Opposition leader has scored. The facts, of course, are that notwithstanding Mr Shack's description of the accord as lead weight dragging down Australia's already battered international competitiveness, real unit labour costs are lower now than they have been at any time since the 1960s and are lower than they were for many times even in the 1960s. Seven years of the Fraser-Howard coalition failed either to restore business profitability to its present levels or to bring real unit labour costs down to their present levels even though at the same time that combination almost trebled the level of unemployment. One would have thought that any combination which trebled the level of unemployment would at least have been able to bring real unit labour costs and the inflation rate down. But the Fraser-Howard team at no stage managed to do that. The sort of polemic published in last weekend's Australian, I suppose, is even more alarming in that not even Malcolm Fraser would have sanctioned that sort of inadequate and inaccurate analysis which disregarded the facts and relied entirely on ideological dogma for its backbone. The fact is that because of the success of the accord almost half a million additional jobs have been generated, the inflation rate has been cut almost in half, and real unit labour costs are at their lowest level since the 1960s. We have already achieved two years of real gross domestic product growth approaching 5 per cent and we are on course for a third year of real GDP growth approaching 5 per cent. In addition the Government and the Australian Council of Trade Unions last month agreed to discount by up to 2 per cent the national wage in the first half of 1986 and to observe the accord for a further two years. So barring some catastrophic unforeseeable event beyond the control of any Australian government, because of the cementing of the accord for at least another two years Australia can anticipate a continuation of the extremely high growth rates which we have seen in the last few years, a reduction in the deficit, a reduction in unemployment, and the restoration of our international competitiveness-partly brought about because of the devaluation of the dollar-the adverse potential effects of which have been taken care of by the agreement to discount the national wage in the first half of 1986. In contrast to that I note with genuine regret that the best that the Leader of the Opposition can offer or look forward to as his alternative wages and basic economic policy is five years of industrial warfare. Senator Sir JOHN CARRICK —I refer the Minister representing the Minister for Foreign Affairs to the Acting Prime Minister's statement of several days ago supporting the action of the United States of America in intercepting and forcing to land an Egyptian aircraft containing hijackers. I refer also to the message conveyed to the USA by the Acting Prime Minister as read out to the Senate by the Minister. Do we understand the Minister to say that this message, as read out, is to be understood to convey full support for the US action in intercepting the aircraft and subsequent events? Senator GARETH EVANS —The message that I read out expresses clearly the Government's understanding for the efforts taken by the United States Administration to bring the perpetrators to justice. As such I repeat that it is quite consistent not with the response given some days ago but in fact with the response given yesterday in the House of Representatives by Mr Bowen to a question put to him by Mr Howard. Senator CROWLEY —Has the Minister for Education seen the article in the Sydney Mail of 13 October in which the President of the Queensland Teachers Union stated that he feared for the safety of students in the Torres Strait because of the poor state of their school buildings? Does the Minister agree that there is an urgent need to upgrade those facilities? What action has been or will be taken by the Commonwealth Government to assist with the improvement of facilities on these islands? Senator RYAN —I have seen the article containing the Queensland Teachers Union's comment on the schools in the Torres Strait Islands. I suppose more to the point, in terms of Senator Crowley's interest in this matter, I have seen those schools on the islands. I recently made a fairly extensive trip around the islands in the Torres Strait to inspect school facilities, and like the representatives of the Queensland Teachers Union I was very shocked and dismayed by what I saw. I suppose I have seen more disadvantaged schools in Australia than any other member of this place, by virtue of my portfolio responsibilities and the Government's very deep concern to improve facilities for the disadvantaged in education, but I have not seen facilities anywhere in Australia anything like as inadequate as those currently available to children living on islands in the Torres Strait. Nor have I seen anywhere in an Australian school teachers as ill-equipped to deal with the circumstances they are facing. Senator Peter Baume —You mean materially ill-equipped. Senator RYAN —I mean materially, but also they are ill-equipped in terms of inadequacy of teacher training. Most of the schools are staffed by untrained Islanders, some of whom are managing to cope quite well in these extraordinarily difficult circumstances. Nonetheless, they have not had the opportunity for teacher training that teachers in Australian schools generally have and, therefore, they have great difficulty in providing education for the children. It is also the case that until now no serious attempt has been made to develop curriculum materials which are in any way relevant to the circumstances of those children. Most of them either speak an Island language as their first language or speak some mixture of Island languages. In any case, they have had very little opportunity to hear English spoken clearly and properly until they go to school, where they may or may not have the advantage of an English-speaking teacher to teach them. The situation is one of gross disadvantage. Although members of the Queensland Government collectively must be held responsible because they have allowed this appalling situation to continue for many years, I must commend that Government on its recent decision to transfer the administration of those schools from the notorious Department of Aboriginal and Island Affairs to the Queensland Education Department. Now that that transfer is in place, I believe that the Queensland Government will be able to address more effectively the needs of these very disadvantaged children. But, in the meantime, I am pleased to report to Senator Crowley and the Senate that our Government has undertaken a process of upgrading the physical facilities in those schools by making available a series of capital grants for the replacement of these appalling facilities by adequate facilities. We have already decided to fund the replacement of Mabuiag School at a cost of $670,000, St Pauls School-called Kubin in the Torres Strait-at a cost of $770,000 and a school on Coconut Island at $670,000. In addition, we have made a grant of $312,000 for Bamaga State School, $200,000 for the Thursday Island High School and $194,000 for the Thursday Island Primary School. Clearly, the Commonwealth is playing its part in trying to provide better educational opportunities for the Torres Strait Islands schools. I hope that the Queensland Education Department will now play its part in ensuring that teacher training, proper curriculum materials and access to training for the untrained Islander teachers who wish to train and return to their island, will be made available by a co-operative effort of both governments. Senator WATSON —Is the Minister representing the Minister for Industrial Relations aware of instances of employees on short term community employment programs, on perhaps a building project of 13 to 26 weeks, being pressured to join a union? Is he aware that said employees, if agreeing to membership of a builders union, were automatically expected to contribute to the union's superannuation scheme at a cost of $11 per week? If so, where will this $11 per week contribution by an employee of 13 weeks duration ultimately be placed? Will the Minister explain to the Senate how short term employees could benefit from compulsory superannuation contributions if the intention of the superannuation scheme is to benefit employees where the continuance of employment and contributions to such funds is assured? Senator WALSH —I do not know a great deal about this matter. I will have to seek a response from the Minister for Employment and Industrial Relations for the main part of Senator Watson's question, but I should correct one aspect of it. For the building industry in general, regardless of whether employees are community employment program short term employees, virtually all employment can be regarded as short term, just because of the nature of the building industry. Therefore, there is nothing necessarily incongruous about employees of three months duration contributing to a superannuation fund. If they returned to employment in the building industry at any time they would, I expect, continue to contribute to that fund, just as building employees in general are expected to do and are in fact doing. The PRESIDENT —I present the First Report for the sixty-second session of the Standing Orders Committee. Ordered that the report be printed. Motion (by Senator Button) agreed to: That consideration of the report in Committee of the Whole be made an order of the day for the next day of sitting. The PRESIDENT —In accordance with section 121 (3) of the Commonwealth Banks Act 1959, I present the annual reports and financial statements of the Commonwealth Banking Corporation, the Commonwealth Bank of Australia, the Commonwealth Savings Bank of Australia and the Commonwealth Development Bank of Australia, together with the Auditor-General's report thereon, for the year ended 30 June 1985. Senator RYAN(Australian Capital Territory-Minister for Education) —I table a paper entitled `Commonwealth Schools Commission Report for 1986' and seek leave to make a statement relating to the paper. Leave granted. Senator RYAN —I seek leave to have the text of the statement incorporated in Hansard. Senator Peter Baume —You should read it. Senator RYAN —Mr Deputy President, I have had a request to read the statement. I was simply trying to facilitate the business of the Senate. I am happy to comply with that request. I present for the information of honourable senators the Commonwealth Schools Commission's report for 1986. The report makes recommendations on the detailed distribution of capital and specific purpose program funds for the 1986 calendar year, as well as a number of recommendations on the operation of the general recurrent and capital grants programs. Decisions on funding levels for general recurrent grants for the period 1985-1988 were taken last year and incorporated in States grants legislation. The Commission has proposed significant changes to the administration of the capital grants program. The Government has accepted the Commission's recommendations on the objectives for the program, including giving emphasis to upgrading and refurbishment of facilities in existing schools, particularly those serving students characterised by low socio-economic circumstances, the construction of new facilities in accordance with overall educational planning, the provision of facilities to assist schools to encourage and cater for increased student participation at years 11 and 12 and the provision of facilities to encourage equal participation by girls and boys in all areas of the curriculum and to assist in widening career options for girls. The Government has also accepted the Commission's advice that there are significant advantages in the adoption of a more flexible approach to the allocation of Commonwealth capital funds. In 1986 there will be only a single general capital element in place of the five elements operating in 1985. There will also be two national elements: The continuation of the existing Aboriginal and Torres Strait Islander element and a new element for the provision of facilities for children with intellectual and/or physical disabilities, following from the transfer from the Department of Community Services of the administration of capital grants to non-government institutions providing for disabled children. To protect the Commonwealth's objectives for the capital grants program the Government has accepted the Commission's recommended criteria for eligibility and priority for Commonwealth capital funding, including giving priority to those schools serving students from communities characterised by socio-economic disadvantage. While recognising that school authorities must continue to provide for new places, the Commission has proposed that a higher proportion of Commonwealth capital funds should be directed to the refurbishing and upgrading of existing schools. The Government has accepted the Commission's recommendations that by 1988 the minimum level of expenditure on refurbishing and upgrading existing schools should be 50 per cent of Commonwealth grants, subject to forward commitment obligations already entered into. Consistent with the decision to give greater emphasis in Commonwealth funding to the needs of existing schools and students, the Government has accepted the Commission's recommendation that allocations to the States and Territories should be on a per capita basis. This arrangement will be phased in over three years, 1986-88, except in the Australian Capital Territory, where it is able to be implemented fully in 1986. The Government has also accepted in principle the Commission's proposal for block capital grants to approved schools systems from 1987, dependent on the development of arrangements satisfactory to the Commonwealth in terms of the Commonwealth's policy objectives. The Department of Education will conduct further consultations with state and non-government school authorities on this matter. Similarly, the Department will advise on the details of appropriate arrangements for the allocation of grants under the two national elements of the capital grants program-the Aboriginal and Torres Strait Islander element and the special schools element. The Government has accepted all of the Commission's recommendations on the allocation of grants between States and Territories for the specific purpose programs. The approval of projects of national significance will be undertaken separately by the Minister in the normal way. The Commission has also made a number of recommendations relating to the operation of the general recurrent grants program. The Government will be considering these proposals in the near future. In the meantime, the decisions announced today will enable the necessary legislation for appropriation of grants for 1986 to be finalised. I move: That the Senate take note of the paper. Senator PETER BAUME(New South Wales)(3.12) —The reason the Opposition sought to have the Minister for Education (Senator Ryan) read the statement is that it is her statement; it originates in this chamber. We thought it appropriate that it should be read. It is a very important statement. Such a statement appears each year and lays down the Government's priorities and decisions in relation to the funding of schools. This statement then lays down the response of the Commonwealth Schools Commission to those guidelines. It is a statement that is looked for each year by members of the educational community, as it identifies for them exactly what are the rules under which they will operate. It must be clear to anyone who listened to what the Minister presented to the Senate that this is a very different educational program from those which have operated over several years. We have seen the end this year of what might have been called the Whitlam dream of large educational funding from the Commonwealth. We have seen a rolling back of much of the funding and of much of the thrust of funding by the Commonwealth. Indeed, this report which we are considering today from the Schools Commission sets down in detail a number of areas in which funding which was sought for the schools of Australia and for the pupils of Australia has not been satisfied and for which funds have not been provided. I will mention some of those in a moment. In addition, this statement makes clear once again the Government's intention to provide funding for fewer new places in the non-government sector and to concentrate capital funding, not on new places, but on already established places. Senator Ryan —Fifty per cent. Senator PETER BAUME —The Minister says 50 per cent. That is a changed proportion. We are seeing put into effect now the impediments to the establishment of new non-government school places which we have seen coming for a year or more. I will return to that, because the provision of fewer new places, both by the way of recurrent funding and capital funding, is a matter of great significance to the non-government sector. I turn to the statement itself. The Commission in this report has identified a number of areas in which the Government's decisions on school expenditure involve rejection of the expert advice of the Commonwealth Schools Commission. I have great regard for the Commonwealth Schools Commission, and when I was Minister, working in daily and constant contact with the Commonwealth Schools Commission, I formed a great regard and respect for the work of the officers. I must say that that respect has risen in the past year as I have watched officers operating under immense work pressures to meet impossible deadlines and to try to put in place very complicated new arrangements in the minimum amount of time. I think some of the officers, particularly those working in the area of recurrent expenditure, have undertaken superhuman work in a very brief time. I draw attention to the branch which was operating under Dr McMorrow, which included people such as Prue Carmel and people who contributed to this country by the dedication which they displayed to the administration of really very difficult programs being changed by a government intent upon rolling back the access of the non-government sector to funding. In this report the commissioners have drawn attention to some of the problems. They have drawn attention to some of the advice which the Government has seen fit to reject. This included a decision by the Government to bring about a real reduction in overall schools expenditure of 1.3 per cent over their recommendations, a real reduction in program expenditure for government schools of 2.7 per cent over their recommendations, a real reduction of joint government and non-government schools programs of 3 per cent over their recommendations and a 50 per cent reduction in the participation and equity program which was announced in the May mini-Budget and which is a decision directed primarily at the most disadvantaged students within our schooling system, the ones who might think they could look most readily to a Labor Government for assistance. We have seen a 50 per cent cutback in participation and equity program funding, much of that program funding, of course, going into schools when it was operating. We can only anticipate from the way in which the Minister has presented those cuts that the participation and equity program will end at the end of 1987 because she said that the funds would be cut in half and extended over two years. That program was a continuing program of some nine years duration, starting off under Senator Sir John Carrick as the school to work transition program, and being expanded and developed for the benefit of the most disadvantaged. The Commonwealth Schools Commission has now found it proper to draw attention to this savage cutback of 50 per cent in the participation and equity program. That must stand as one of the starkest indicators of where the priority of the Hawke Government lies. The priorities do not lie with the disadvantaged or with those in need. The people who have been undertaking, firstly, school to work transition education and, latterly, participation and equity training-that is the same kind of program but under a different name-are distraught and distressed, not on their own behalf but on behalf of the clientele for whom they have been working successfully and continually and for whom the money has now been cut off. The Schools Commission went on to comment on the $20m reduction in the capital grants program for government and non-government schools over the careful recommendations of the Commission, the rejection of the Commission's recommendation that an additional $41.5m be allocated for what it described as urgent needs in the areas of Aboriginal education, the new arrivals element of the English as a second language program, the disadvantaged schools program and the special education program. These are all particularly distressing because they again relate to areas affecting disadvantage of one kind or another. It is in these areas that the Government has failed to respond to the Schools Commission recommendations. It is a Schools Commission which was appointed, as to the largest part of it, and selected by this Minister and by this Government and put there because it enjoyed their confidence. So much did the Commission enjoy their confidence, of course, that its operating functions have now been taken from it and taken to the Department of Education. Senator Ryan —Nonsense! Senator PETER BAUME —They certainly have been taken to the Department of Education. That is a matter of fact. It has been left with its advisory function but without its capacity to gather data and to be, as it has been over 10 years, a potent force for educational advice and change, respected on all sides. It has lost that because of the fact that it has been gutted in the way it has. In the report which the Senate is considering now the Schools Commission comments: . . . many of the urgent needs of students who most require special assistance to overcome aspects of educational disadvantage continue to be neglected, and in some cases exacerbated. That is a damning statement by the Government's own Schools Commission of the Government's decisions in relation to educational funding, not just as to quantum but in terms of the priorities which the Government has set. The Government has determined that money will not go to the people described by the Schools Commission as those suffering educational disadvantage. The Commission has had occasion to say that not only will those needs continue to be neglected but also, in some cases, they will be exacerbated. I would have thought that the Minister, in bringing down her statement and identifying, as she did, the new areas of priority, might have drawn attention to those really quite trenchant criticisms by the Schools Commission and that she might have chosen to answer them, explain them or modify them by some interpretation; but to ignore them is, I think, the least responsible course that could have been taken. It is likely that Senator Ryan will face a barrage of criticism from within the educational community over the priorities laid down in these cuts. They are, in fact, Labor priorities coming from a Labor Government and it must stand or fall by them. One of the elements of the guidelines which are the subject of this Schools Commission report relates to the capital and recurrent funding of non-government education. It is not possible to let the occasion pass without commenting on matters which arise from the report and from the guidelines on which it is based. It is quite clear now from announcements in the last week that the Government is intent on pressing ahead with a limitation in the development and growth of schools in the non-government sector; and that is, of course, in the provision of places for children to have their education in the non-government sector if that is their wish and their parents' wish. About a week ago-I do not have the date-we had from the Minister a list of some 68 new non-government schools which have been approved for recurrent funding for 1986. Those schools are grateful that they have got on the list. We have some interest in how some of them got on the list, but we will take that up at another time. Senator Ryan —Ask the State committees. Senator PETER BAUME —We hope that the committees were not influenced in any way; we will take that up at another time. What is of interest in that list is the schools that did not get listed. They have now been told that there is no funding available for the support of the parents or of the children who will attend those schools in 1986. In my State of New South Wales, 14 schools did not attract funding under the guidelines which the Government has brought down. All of those schools were established within the guidelines laid down by the Government. They have passed through the various State approval procedures and have been considered within the Commonwealth Schools Commission. We find, when it comes to the Government making a decision, that it has made a budgetary decision which has denied funding for at least 14 schools in New South Wales-or has not let them into the funding. Probably more than 20 schools across Australia will be affected. This has caused great distress among the communities, the dedicated parents, the church groups and those who have supported the schools. They are asking the simple questions: `What have we done wrong? Why have we missed out on funding?'. It is worth while examining some of the schools so affected. I have had association with some of them. I attended a public meeting in Willoughby perhaps 18 months ago. It was held by the Armenian community to try to launch its new Armenian school. It was to be called the Hamazkaine Armenian School. I take it that the name is after an Armenian hero. This school was to be situated on land in Terrey Hills which the Armenian community has purchased. What was noteworthy about that meeting of the Armenian community was that that night, from an audience of about 400, the Armenian people either received or were pledged well over $70,000 towards the education of their children and towards what one of their spokesmen called in the newspapers this week their attempt to make a contribution to Australia. There is absolutely no doubt that if this school were established and were to receive the recurrent funding that so many other schools receive, it would be saving money for the public education system; it would be saving New South Wales money for every child who attended it. It would provide another community focus for one of the finest communities in Sydney, the Armenian community. These people cannot understand what they have done wrong and what they are to do next. Did the fact that they are Armenian cause them to be refused funding? Is that why they were not given money? Senator Ryan —Don't be absurd. Senator PETER BAUME —They do not know why it was. Is it because they come from Liberal electorates generally? Is that why they are refused funding? Is it because they are a strong, coherent cultural group? Is it because they would include in their offerings the teaching of the Armenian language? When we were in government, when I was Minister for Education and also when my colleague Sir John Carrick was the Minister for Education, our policy was clear. Any group that established a school and complied with the conditions of State registration so that it was adequate in educational terms-the school had to meet a couple of simple conditions, such as being a non-profit organisation and a few other conditions which the Commonwealth applied-would then qualify automatically for this kind of recurrent funding. Senator Sir John Carrick —And rightly so. Senator PETER BAUME —And rightly so, as my colleague says. I want the Minister for Education, Senator Ryan, to appear before the Armenian community in Sydney, and tell Dr Paul Sarian and his school committee what sin they have committed that they cannot get recurrent funding. If the Minister does not wish to tell us about the Armenian school, let us ask her about another school, a primary school at Harris Park operated by the Maronite Sisters of the Holy Family. I know this school because I opened the primary school and I know the sisters. Senator Sir John Carrick —It is an underprivileged area. Senator PETER BAUME —It is an underprivileged area. It is in the Federal seat of Parramatta. The sisters contacted me this week in great distress, having been unable to have their phone calls returned by their local member, the Minister for Sport, Recreation and Tourism (Mr John Brown). They cannot get any response from Mr Brown, so they are coming to the Liberal Party senators to try to find out what sin they have committed. All they wish to do is to carry on the education of the children who have gone through their primary school at Our Lady of Lebanon School, at Alice Street, Harris Park. Senator Puplick —The Government has found the money for a football stadium. Senator PETER BAUME —The Government has found the money for a football stadium and lots of circuses, but when it comes to supporting a Maronite Christian community in Harris Park with recurrent funding for the education of children in a school that is already there at primary level, no money is available. That community does not understand the criteria which have been applied and which somehow it has failed to meet. It cannot find out why it was low on the priority list. It has already spent over $300,000 in setting up the school, anticipating that it was contributing to this country and that it would be able to get recurrent support for its children. Every non-government secondary school I have been to in the western suburbs of Sydney has every available place full and every principal has long waiting lists of parents desperate to have their children admitted to these schools. The Government is now making it clear that those schools will be lucky if they can get funding, and there are at least 14 schools in my State whose funding has been refused. This is a matter of great concern. It is occurring not only in Sydney. In the country, in the Dubbo area, we find that some schools have been refused funding. The proposed Lincoln Agricultural College, again a college which is being established to provide some boarding facilities for children in non-metropolitan New South Wales, has been refused recurrent funding. Anyone involved in education will know that the access available for schools with boarding facilities is limited and that for many parents in isolated areas there is a desperate need that such schools be available. Lincoln Agricultural College has applied for and sought recurrent funding. It has been refused. The Central West Christian Community School at Parkes has been refused recurrent funding, according to the list announced by the Minister last week. I and many other senators will recall, in 1982, the criticisms that Senator Ryan, then in opposition, made of some Christian community schools. It is in the Hansard. Senator Sir John Carrick —What did she say? Senator PETER BAUME —She attacked the philosophy which underlay their educational mission. That is okay; that is her right. On the record as a matter of history is the view Senator Ryan expressed about some of those Christian community schools. One school in the area of Parkes has been refused eligibility for recurrent funding for its years 11 and 12. That school would have had a total of 11 students in year 11 for 1986. The Central West Christian Community School began in 1982. It already had kindergarten to year 8. It has gone on expanding. Under the old guidelines, the Liberal Party guidelines, of course, the extension of funding would have been automatic. Under the Labor guidelines there will be no funding. The reason is that Senator Ryan, by back door methods, continues the war of attrition on non-government education. The facts are quite clear. I have identified the schools. If there is no war of attrition why has there been no funding? I come back to the fact that we understand that the Government must set its priorities in light of the available budgetary capacity which it finds it has. The Budget is often about saying no. In setting the guidelines for educational funding this Government has clearly indicated where its priorities lie. They are now priorities which are understood only too well by 14 non-government schools in my State of New South Wales which are baffled as well as angry because they do not know why they have missed out. They understand the priorities which are to limit the extension and growth of non-government education and its funding. We have heard today in explicit terms that the capital funds are to be directed towards refurbishing and not towards the creation of new places. We have seen from the Commission's comments that some of the Government's declared priorities by which it will handle its budgetary contingencies will fall most heavily upon the disadvantaged and those most needy in the community. If this is the way in which a Labor government sets its educational priorities, it is a sorry day for the Labor movement and a sorry day for education in Australia. Senator Sir JOHN CARRICK(New South Wales)(3.34) —I have not had the opportunity, as yet, to study in any detail at all the report of the Commonwealth Schools Commission which is before the Senate. I listened very attentively to the statement of the Minister for Education (Senator Ryan) and even more attentively to the excellent reply by Senator Peter Baume which illustrated that the tabled report bears no relation at all to the bland statement of the Minister. What is happening to education under the present Hawke Government and the present Minister is quite clear. Firstly, a Schools Commission was set up and given authority as an independent body to devise policies and recommendations for the government of the day. What has happened is that that now no longer suits the government of the day. The government of the day proposes to impose its directions, its heavy hand and its policies on the whole of Commonwealth education. As a result, the Government set out to do a number of things. First, it set out to change significantly the membership of the Schools Commission, its nature and its balance of philosophy and, therefore, to get a kind of directionalism of philosophy that suited the Government. That was done, but that was not enough. So now the Schools Commission is to be emasculated. Part of it is to be taken into the Department of Education and the Department is to put its heavy hand upon the running. Now the final barrier has come. It is quite clear from this report that on a number of absolutely major matters the Government has completely ignored the Schools Commission and its report. It is of no use the Government saying that its basis is underprivilege. How can it be underprivilege when, step by step, Senator Peter Baume, my colleague and a former Minister for Education who understands these matters, threw up items of underprivilege which have been ignored? The participation and equity program is to be slashed. It is a program relating to underprivilege. School after school in disadvantaged areas is to be ignored. There is a principle now which is quite different from what ought to be the concept. It is all right for a member of the Senate as a private senator to express statements of individual and personal philosophy on education. It is quite another thing for that person, having become a Minister, to attempt to impose upon the Commonwealth of Australia personal philosophies that are not, in fact, part of the balance of the spectrum of the Australian people. It is quite wrong for a person who has expressed a view, not in equality of opportunity but in equality of outcome, to try to force such a levelling down in Australia. It is quite wrong to look at a situation in which a report comes before us which was sent for by the Minister and which says, in effect, that it would be wrong to have a major movement away from the government sector into the independent school sector because it would alter the sociological structure of Australia. What right does a government have to determine that the sociological structure shall be a particular shape or size? What right does it have to determine that, in fact, the ordinary trends of the community, decided by the judgment of individual people, should not happen? What right has a Minister to put these arbitrary barriers in the way? She has no right at all. This is, of course, social engineering at its worst. This is the socialist mind which says: `I know better than the people do; I know better than the community; I am going to force upon the community my will'. The education system in Australia is compulsory. It is compulsory for parents to send their children to school for a range of years and syllabuses. It is not compulsory and never has been for parents to send their children to government schools. The compulsion is forced by governments which deny funding, not to rich families at all, but to the parents of ordinary middle income and poorer families so that the parents cannot make their choice and send their children to independent schools. There can be no plea from the Minister that her policies are the result of a limitation of funds. That is a nonsense statement indeed. There can be no plea from the Minister that she is cutting back only upon the affluent. The best way for any government to save funds is to assist the movement of students from government schools to independent schools because it costs much less-50 per cent less-to maintain a child in an independent school. What are the reasons why the Government is putting these obstacles in place? They are quite clear. The obstacles are being put in place to achieve a form of social engineering, to achieve the kind of resistance to freedom of choice about which the militant unions talk freely and which the pressure of the left wing of the Labor Party tries to enforce. Everybody knows that a very significant segment of the Caucus of the Labor Party is entirely opposed to the freedom of choice. It wants to drive out freedom of choice, the right to have any independent system at all. Everybody knows the enormous pressures which are on the Minister and the Government from teacher unions and the militant, extreme leaders of the unions who are quite open in their statements that they do not want any kind of support for the independent school system. Let us understand these things. It is no good the Minister mouthing statements that all she is doing is not helping the very rich or affluent schools. We are talking about the right of ordinary families in Harris Park, people of modest incomes, people in Labor electorates, to freedom of choice and the absolute denial of that right. It is not because there is no money; quite clearly, in the long run it must be cheaper for the Government to help and encourage that situation. Throughout Australia when I was the Minister for Education there was a yeasting of interest at the community level to set up Christian community schools. Of course there is a desire amongst parents for freedom of choice so that there can be both spiritual and temporal atmospheres in the classroom. I would be shocked if in any way the Government were putting obstacles in the way of Christian communities getting together to establish schools-- Senator Ryan —We even assist Jewish communities. We are not racist. Senator Sir JOHN CARRICK —The Minister cannot have it both ways. She says that she is responsible for this decision and that decision but when it is a difficult one she says it is somebody else's doing. In the long run it was the Schools Commission that made recommendations; it was the Minister who denied them. The Minister cannot have it both ways. She cannot fall back and say: `A steering committee made this decision; so I will hide behind that steering committee'. The Minister is on record as having a particular philosophy of education which is related to equality of outcome and social engineering. She is doing what is fundamentally wrong in the Westminster system. As a Minister she should be acting for the benefit of the whole of the community; she is trying to impose her own form and stamp of personal philosophy upon the community and that-- Senator Ryan —Gross misrepresentation. Senator Sir JOHN CARRICK —There are tons of opportunities for the Minister to speak. Let her say that she has not changed in a particular shape or size the personnel of the Schools Commission. Let her say that she has not emasculated the Commission. Let her say that she has not done damage to the participation and equity system. Let her say that she has not refused the establishment of school after school. Once a group could come together and say: `We satisfy the temporal standards of teaching of curricula and standards of skill of teachers. We can get a certificate from the State stating that we can function as a school'. Let her deny that what was an ongoing program has been arrested. No longer does that automatically occur. Let her deny that the independent school system-both the systemic and non-systemic areas-is in great outpourings highly critical of the Government's policies. If the Opposition is wrong in what it is saying, why is the independent school system critical? It is not just the affluent at all but the whole of the systemic area that is critical. Why has a government which said to the people that it would not bring great changes to the system done so? Step by step what is happening as we now see it is that the Government is putting up a pretence, a fabric, of advice. The Schools Commission is no longer there to advise or to be taken seriously; it is a pretence that there are advisers outside the Government. The real decisions are made according to the Left philosophies of the Labor Party. There are pressures upon the Government and the Minister from the teacher unions for acceptance of their philosophy. Otherwise why has the philosophy of education, which was built upon a general overview for the whole spectrum of the community, been step by step steadily moved to a form of social engineering? Why is it that we can put forward the preposterous notion of equality of outcome if ever there was one rather than the real, vibrant notion of equality of opportunity? How could we ever allow a situation that did not increase perceptibly the percentage of students in independent schools because it would alter the sociological structure of Australia? What kind of nonsense tolerates that instead of rejecting it? Why in this place has the Minister not rejected those kinds of allegations? I have not seen the report in detail. Unless any other senator wishes to speak, I seek leave to continue my remarks later. Leave granted; debate adjourned. Senator RYAN(Australian Capital Territory-Minister for Education) —by leave-I had anticipated that a full debate regarding the Government's response to the School Commission report of 1986 would take place when the legislation was introduced into this place. However, I have had to take the unusual step of seeking leave to respond to some of the matters that were raised because they were so outrageously wrong and misrepresented so grossly the facts about government policy and the facts about decisions recently taken. For the sake of those members of the public who may have been listening, I feel it is only my responsibility to correct some of the gross errors that have just been made by two sacked education spokespersons for the Liberal Party of Australia. A statement was made by Senator Peter Baume in relation to the new non-government schools policy-it was reiterated in an equally erroneous fashion by Senator Sir John Carrick-that there was some attempt to curtail the development of new non-government schools and that that was based on some sort of religious or race bias. I am very offended. The remarks of Senator Sir John Carrick could be interpreted only as meaning that I was acting out of some sort of prejudice against people of the Christian faith. His remarks suggested that I had some sort of Opposition to Christian education and that this philosophy was being implemented in this policy. Because such a gross insult has been perpetrated just recently in the Senate I will have to take the time of the Senate to point to the schools that were funded and, before I do that, to explain how some schools came to be funded under this category and how others did not. As honourable senators ought to be very well aware, although some pretend to be otherwise, a new non-government schools policy was developed by the Schools Commission and accepted by the Government. The policy which is now being implemented was accepted in its entirety by the Government from the Schools Commission and that policy in turn was developed by a panel of Schools Commission commissioners, a majority of whom were representatives of the non-government sector. Senator Peter Baume —It was a Government decision in the end. Senator RYAN —It was a Government decision in the end, as indeed it ought to be a Government decision in the end. But that Government decision happened to be a decision which accepted the recommendation of the Schools Commission. In brief, that recommendation was that the approval of new non-government schools should take place after appropriate planning procedures had been gone through. The reason was this: It is true, as both Senator Baume and Senator Sir John Carrick claim, that while they prevailed as Education Ministers there was a totally libertarian approach to the funding of new non-government schools. That is absolutely true. It is true that any school that was able to acquire registration, and in some States registration procedures were so lax as not to exist at all, could attract Commonwealth funding. The upshot of that was that many schools that received funding collapsed and the children who were enrolled by their parents in good faith were left stranded. Other schools suddenly had to accommodate those children. That was not a policy that we regarded as being in the interests of those children or any of the other children who were affected by such decisions. It was also the case that as a result of a totally unplanned development and proliferation of new non-government schools in areas where there was already a more than adequate supply of places, including places in the non-government sector, existing investments in government and non-government schools were seriously undermined by new schools springing up and attracting students away, at least for a period of time, and thus undermining the resources which parents had already contributed to existing non-government and government schools. As a result of these unhappy episodes, our Government decided, in consultation with the Schools Commission and all of the interests with which the Schools Commission constantly consults, to have a much more thorough planned approach to the development of new non-government schools. Under that planned approach, no school which has adequately consulted and has planned in co-operation with State and non-government school authorities will not be funded. The list of schools to which both Senator Baume and Senator Sir John Carrick referred in the most unbalanced and misleading fashion was actually a list of schools brought before me as Minister by the Schools Commission after decisions had been made at State level by State planning committees on which non-government school representatives have, I think, majority representation; certainly in some States they do. Each of those State committees assessed applications. They then afforded a priority category to those representations. They had high and medium priorities, both of which were consistent with planned educational provision. They then had low and lowest, which were proposals that were not consistent with planned educational provision. This meant, in lay persons' talk, that those schools would be taking students away from schools which were already adequately supplied with places. Those judgments were by and large accepted by our Government and by me as Minister. There were two cases of schools which were not given a high priority funding and to which, after I sought further information, I decided to give funding. Senator Peter Baume —Which were they? Senator RYAN —I will not answer that interjection. So, as a result of this process and to be consistent with the planned educational provision policy endorsed by the Schools Commission, all of the schools that were recommended by the State committees were in fact funded. For the benefit of honourable senators and in face of the implied religious or race bias that I was subjected to recently let me read out a range of schools-I will not read out all 68 of them. Honest people listening to this debate can then make their own assessment about whether our Government is in any way hostile to Christian education, as was implied by Senator Sir John Carrick. In New South Wales, the State from which both honourable senators come, new schools approved for funding include the Broughton Anglican College; Catherine McAuley Girls School, Westmead; Domremy College, Five Dock; Dubbo Christian School-which was commented on by Senator Baume; Eaglevale Catholic Primary; Eukarima School; Gateway Christian School; Heritage Christian School; Illawarra Christian School; John Paul College; Masada College; Menai Catholic Primary; Mount Carmel High School, Varroville; Mullumbimby Community School; Newcastle Christian Life Academy; Our Lady of the Rosary, Waitara; Redfield College, Cherrybrook; Southern Highlands Christian School, Bowral; Special School for Autistic Children, Cringila; St Mary's Primary School, East Orange; St Mary's Rosebank College, Five Dock; St Michael's Primary School, Booragul; Sutherland Shire Christian School; Taree Catholic High School; and Windsor Catholic Secondary School, South Windsor. That is only one State. I could go on State by State. If honourable senators were counting they would have noted a preponderance of schools established precisely on the Christian philosophy and calling themselves Christian schools that have been funded, as have Jewish schools and Christian orthodox schools. A further list contains the Oakleigh Greek Orthodox College and an Islamic primary and secondary school. So the list goes on. The list also contains the Clontarf Aboriginal School, Seventh Day Adventist schools and so on. Both honourable senators have seen this list. Both know that the 68 schools that I announced as being approved for funding included a preponderance, I would say, of Christian schools and a very broad diversity of schools based on other religious philosophies as well as some schools which are based on philosophies which are not connected with any particular religion. How any honest senator, reading that list, could get up in this place and accuse me and, by implication, our Government of having some sort of hostility to Christian schools is a matter of great concern and almost incomprehension by me. Both of the honourable senators who made these disgraceful imputations have been Education Ministers. They know that the Commonwealth does not involve itself in concern about the religious or other philosophy of a school. They know that the matter of the registration of schools is a matter of State responsibility with which we do not seek to interfere. It is at that point the curriculum of the school, including what will be offered in terms of religious or any other philosophical instruction, is assessed. That is not a matter in which the Commonwealth Schools Commission or the Commonwealth Government involves itself in any way. What the Commonwealth has to do is to make sure that scarce resources are spread fairly throughout the community and I believe that the list that I have just read out gives some indication of the diversity of schools which are being funded under our policy. At the same time, we have to ensure that schools which we fund are economically viable, that they are not going to collapse a few months after children are enrolled and that they are not being developed in areas where other non-government schools or government schools will be seriously-- Senator Sir John Carrick —Or government schools? Senator RYAN —Or government schools will be seriously affected by their development. These are reasonable planning procedures which do not in any way involve any judgments about the religious philosophy of the community organising the school. I think it is very unfortunate that such accusations have been made. The only thing I can say is that, as the schools community is an increasingly well informed community, it will have no truck with suggestions of this kind. In relation to other points made by Senator Baume in regard to the Schools Commission report, of course not every recommendation for funding was accepted. Of course in a budgetary situation like ours, we do not achieve the ideal in terms of funding. Of course we would like to be able to spend more money in special education and in the disadvantaged schools program and many others. The Commission rightly makes recommendations for funding. We assess those. We are not able to meet all of those recommendations. Senator Sir John Carrick and Senator Baume would know that when they were Ministers for Education the Fraser Government similarly did not fund to the level of every recommendation of the Schools Commission. In fact, the last time I made an assessment of the success of the Schools Commission recommendations under the Fraser Government compared with the recommendations under the Hawke Government I think we were ahead on accepting recommendations. Be that as it may, Senator Sir John Carrick and Senator Baume will know that when they were Ministers for Education no report of the Schools Commission had every recommendation for funding met fully by the government of the day because governments have budgetary constraints upon them and they also make judgments. It is true, as both honourable senators suggested, that in the end these decisions are government decisions, and properly so, but they are decisions taken in the light of public advice given by the Schools Commission-advice which is derived from extensive consultations with all interested parties; advice which is made available in this place for debate. The public can judge the Government's performance in relation to that advice. That situation will continue to prevail because the Schools Commission will continue to do what it has done today-bring reports to the Government, have those reports tabled and have Government responses tabled so that senators and anyone else interested can make up their minds about what the Government has decided to do in relation to recommendations. That is a proper procedure and one with which we will certainly continue. Any suggestion that there is something improper or outside the Westminster system in our not funding every single recommendation of the Schools Commission is absolutely absurd. I do not propose to keep the Senate at this stage because, as I have said, the matters that I outlined in my ministerial statement will require that legislation be passed through this place and there will then be ample opportunity for further debate. I simply conclude by saying that I cannot understand why senators who claim to be concerned about education and educational opportunities find it useful to misrepresent what has actually happened. I understand that senators with a different philosophy may be critical of decisions we make but I cannot understand why they choose not simply to criticise the decisions we have made but to misrepresent wildly those decisions. Let us agree on the facts and then let us have a debate on them. I express the hope that erroneous interpretations and untruthful claims and assertions can be left aside. We are quite prepared to defend the decisions we have made and the reasons for which we made them. Senator COONEY(Victoria)(4.02) —by leave-I move: That the Senate take note of the papers. The reports on the Mount Allan and Gurindji land claims concern claims made in the Northern Territory by the land councils in those areas. I want to make two short points. First, in looking at the claims made by Aboriginals in the Northern Territory it has to be remembered that, bearing in mind the area of land involved, their claims are moderate, given the history of the Northern Territory and given the history of the Aboriginals in that area, which goes back well before the time of white settlement in Australia. It is often suggested these days that the claims and amounts granted on the basis of those claims are excessive. It is well to remember in reading these reports that that is not so. The second thing I want to talk about is the representation made on behalf of the Aboriginals in respect of both these claims. I know that in the Mount Allan land claim Mr John Coldrey and Mr Hird appeared for the claimants, and Mr Ross Howie appeared in relation to the other claim. Mr Howie and Mr Coldrey come from the Victorian Bar, and they went to the Northern Territory to appear on behalf of the Aboriginals in that area. They gave up successful and lucrative practices over that time. Credit ought to be given to them, and I do so in this address. Senator PETER BAUME(New South Wales)(4.04) —I join Senator Cooney in commenting upon the Mount Allan and Gurindji land claims. There is an unfortunate spirit abroad in the community at present which would assert that land is being handed to Aboriginal communities in some capricious, careless or reckless way under provisions of the Aboriginal Land Rights (Northern Territory) Act. The tabling of the reports on these two claims is one more occasion on which we can set that record straight. These reports by two Aboriginal land commissioners, Sir William Kearney and Mr Justice Maurice, are merely steps along the way by which land claims are processed; they are not in themselves the granting of land to anyone. Those of us who have been Ministers for Aboriginal Affairs will know that built into the Aboriginal Land Rights (Northern Territory) Act 1976 are quite severe requirements which need to be met before Aboriginal communities can claim land. Procedures are laid down which must be followed before a recommendation can go to the Government that land should be granted. Even at that stage the Act provides that the Minister must exercise further judgment and must make a decision before any land trust is established. I put on record once again that in my time as Minister there were at least a couple of occasions when I declined for good and proper reasons to establish a land trust even where one had been recommended. One occasion involved the land at Vanderlin Island, associated with the Borroloola claim, where to have granted the land trust would have meant dispossessing another Aboriginal person who had some claim to the land but who, under the terms of the Act as it was drafted, would have had no right. No one really objected to that ministerial decision; the Aboriginal community understood it. The other claim which caused a lot of concern-I do not even know whether it is resolved now-was the claim in relation to Beetaloo Station where some Aboriginal people held a pastoral lease but under the Act as it is drafted it was possible for those who alleged that they were traditional owners to claim the land and have their land claim heard. For those who seem to think that things are happening in a reckless or capricious way I simply put on record what these reports contain. They contain considerable evidence as to traditional association, evidence as to traditional attachment and ownership, determinations by the Commissioners as to those matters, determinations by the Commissioners as to various matters of detriment and finally, of course, they contain the recommendations of the commissioners. Under the Aboriginal Lands Rights (Northern Territory) Act land trusts have been established only following careful, thorough, painstaking and sensitive consideration. As the debate develops in the community I would not want to hear anyone claim that land is being given wrongly or recklessly. I would say to anyone who claims that any white Australian has been dispossessed of land which he or she held that that is simply not true and I would ask them to examine the record and try to tell us where land has been taken away. As Senator Chaney said in an excellent contribution in the Senate last week, great gains are to be made from a sensitive, reasoned, bipartisan debate on Aboriginal affairs. Part of that debate should be an acknowledgment of the care with which the whole process of land claims proceeds and of the care which the Parliament gives to the reports which are brought down. I trust that the Government will give such attention to these reports. I notice that one claim is for the Gurindji people and that has certain historical importance. It will be of great interest to see how the Government responds to these claims. Question resolved in the affirmative. Senator SIBRAA(New South Wales)(4.09) —I move: That the Senate take note of the paper. I wish to speak on the Qantas Airways Ltd annual report for 1984-85 because on 11 October when the Senate debated the Qantas Airways Limited (Loan Guarantee) Bill 1985 Senator Sanders made a number of remarks with which I want to take issue. At the appropriate time I would like to deal with his speech at length. I take this opportunity to refute some of his arguments because the matters he raised do arise in the annual report. In Senator Sanders's speech the other day he said: Qantas does have a fine safety record. For one thing, Qantas, like any other airline with a very good safety record, has been lucky. TAP Portugal used to be the safest airline in the world. It had one crash at Tenerife and went to the bottom of the list. What he said about TAP is wrong. I can supply statistics about that at a later date. It certainly had a crash. It was amongst the safest airlines in the world, but to say that it went to the bottom of the list is nonsense. Flight Inter- national, a very reputable civil aviation magazine, earlier this year concluded that Qantas was the safest airline in the world. It used a formula that took into account the miles flown, the passengers carried and the types of conditions in which it flew. I point out to Senator Sanders that Qantas operates in and out of European capitals in winter. Senator Sanders also talked about cheaper fares and the benefits of deregulation. He cited certain United States fares, one of which was Los Angeles to Seattle. We have heard arguments before about the cost of air fares between places such as Los Angeles and San Francisco. He did not point out the huge population that is being served by the airlines in the United States. For example, California alone has 21 million people in an area roughly the size of the Sydney to Melbourne area. I believe that United States style deregulation could not operate in Australia. Senator Sanders did not mention that United States deregulation has meant cheaper fares for some people in some cities at some times. More importantly, evidence is now coming to notice that deregulation has meant a decline in safety standards. In the United States there are now fewer air traffic controllers than before the air traffic controllers strike, fewer Federal Aviation Administration airline inspectors than before deregulation and the number of United States airlines operating large aircraft increased from 34 to 58 between 1978, when deregulation began, and 1983. That means that 24 more major airlines are operating in the United States. The number of commuter airlines has increased from 208 to 291 and the number of flights increased from five million to 5.4 million in that five-year period. Conclusions are now being drawn-these are not my conclusions but those of an article in the New York Times on 12 September entitled: `Concerns on air safety-questions and answers'-that safety standards are slipping because of increased competition and fare wars between the major operators. I agree with Senator Sanders on one matter; that is, when he said that Qantas had applied to carry international passengers on domestic routes within Australia. We now have the ludicrous situation, for example, where a person can fly into Perth on British Airways and cannot continue travelling within this country on another international airline. That person must travel on a domestic airline. Qantas is the only airline in the world that has this disadvantage. If it were given permission to carry international passengers domestically within Australia-I do not mean domestic passengers, but those who have come from overseas-we would certainly see cheaper fares which would benefit tourism in Australia. Senator Sanders also made some remarks about Continental Airlines. I do not have time to talk about Continental's anti-union policies and the reasons why it still operates into Australia. I will be able to deal with that matter at a later stage. Senator ARCHER(Tasmania)(4.14) —I would also like to comment on the Qantas Airways Ltd annual report 1984-85. If we read the figures fairly carefully we will see the caution expressed as to the fineness of the margin and the hairline profitability that exists. The overall profit for the year includes $149m of an abnormal profit from the sale of assets. Without taking that into account, the pre-tax profit on operations was only 462.3m. That shows that Qantas Airways Limited carried nearly 2.5 million passengers-up 15.8 per cent on the previous year. Cargo increased by 15.7 per cent. The load factor was the highest ever at 65.6 per cent, yet the gross profit was up only 7.5 per cent because of the increased costs that had gone with it. Mr Leslie commented in the report: It will be difficult for the Company to sustain the level of profitability experienced in the last two years . . . The Company also faces large cost increases as a result of the devaluation of the Australian dollar. Our fuel bill alone, which accounts for 23 per cent of total expenditure, is likely to increase by $70m. The decline in Australians travelling overseas as a result of the decrease in the value of the Australian dollar is not forecast to be offset by a commensurate influx of overseas visitors. Qantas will have to be very careful about its operating procedures in the next year. The figures indicate that only about 4c in the dollar goes into gross profit. When one is down to the last 4c one is sailing fairly close to the wind. There is no doubt that Qantas is all the things that people say about it. It is a very great airline. It operates wonderfully well. People always say that once they get in the air it is the best airline in the world. They usually say that things are not quite the same on the ground, where there are all sorts of problems. I can vouch for the fact that only yesterday it took me one hour and 20 minutes to get a suitcase off Qantas. A considerable number of passengers found that that was the case. I cannot really see that that is reasonable for an international airline. Australians show a very great loyalty to Qantas. It is well deserved but I am disappointed that Qantas did not show the same loyalty to Australia when it came to the re-outfitting of the aircrews. Even though it has over 12,000 employees and it may be nice to be able to say `We have gone French in our uniforms', it would have been far more appropriate if Qantas had said: `We are proud to be Australian and operate with Australian uniforms'. There is no doubt that the talent is in Australia to provide those uniforms. There is no doubt that the designers are here. There is no doubt that the manufacturers are here. It is crazy that Qantas should be so thoughtless and shortsighted as to buy its uniforms from France, at a time when Australians generally have given Qantas tremendous support. Most of the people I know who travel, travel Qantas by preference. Senator MAGUIRE(South Australia)(4.18) —I also wish to address some remarks to the 1984-85 annual report of Qantas Airways Ltd. The annual report is in respect of Qantas's 65th year of operations, making it one of the longest operating international airlines in the world. The report also makes it very clear just how the Australian air transport industry has developed. It is now a major employer in this country. With its total employment at the end of March this year well in excess of 12,000 persons, Qantas is one of Australia's largest enterprises. It is very important to note that Qantas's profits on its airline operations rose from $57m to $62m in the period under review. Most importantly, its dividend to the Commonwealth Government, its owner, and, through the Commonwealth, the dividend effectively to the taxpayer has risen from $6.9m in 1983-84 to over $20m in 1984-85, almost a three-fold dividend in 1984-85 compared with that of the previous year. Qantas carried about 2.4 million passengers in the year under review, representing a large increase of almost 16 per cent over the previous year. It should be noted that 1983-84 was a bad year in which Qantas's airline activity suffered quite a significant contraction. Most importantly, in the year 1984-85 the airline's revenue load factor grew quite significantly, from 61.5 per cent 65.6 per cent-a very healthy jump. On my reading of the annual report, that is the highest revenue load factor in the whole of the decade from 1975 to 1985. Certainly, Qantas has come well and truly out of the slump that it was facing in earlier years. This report highlights the fact that Qantas, our international flag carrier, is a very profitable public enterprise. It is one of Australia's most successful public enterprises and a long established one. The report shows, as have other reports by Qantas, just what can be achieved by public enterprise in this country. However, I note with some regret and disappointment that members of the Opposition do not strongly support public enterprise in this country. They have drawn up lists of enterprises which they would like to sell off. Admittedly, those lists change from time to time but it can be assumed that to suit their rhetoric about the virtues of private enterprise and the evils of public enterprise, they would sell off the most profitable public enterprises. To suit their argument, it is very important that everything owned by the public sector is seen as unprofitable so that it can be portrayed as wasteful and inefficient. I trust that the Opposition will not for some years be elected to have the opportunity to introduce its disastrous privatisation policy. One of the important things for my State of South Australia and for Adelaide in particular has been the introduction by Qantas of the new twin-engined wide-bodied aircraft. These aircraft began operating from July on the south-west Pacific routes, the regional routes, operated by Qantas. They have enormous advantages for cities the size of Adelaide, Brisbane and Perth in that, because of their lower capacity, they can be operated much more frequently and offer a greater spread of weekly departure times. I note with a great deal of interest that a discussion and review of potential new international routes from Adelaide, including routes to Tokyo and beyond, are now under way. They certainly will be very welcome indeed to international air travellers leaving South Australia. I think it is very fitting that these new aircraft have been introduced so soon after the opening of the Adeliade International Airport, which is only three years old. In that context, I think it is very important that Qantas now has a more regional focus in its equipment. It will enable, and I think encourage, a greater degree of regional air travel from the less populous capital cities in Australia. Senator JONES(Queensland)(4.23) —I think it is worth while mentioning again, as was said by my colleague Senator Maguire, that Qantas Airways Ltd is now in its sixty-fifth year of operation. Page 2 of the report gives a summary of Qantas Airways Ltd. The report sums up very clearly the actions taken by Qantas and the healthy position in which it now finds itself. Qantas is wholly owned by the Commonwealth of Australia and its functions are to develop and operate international air services as the Australian flag carrier. I think every honourable senator would have to say that Qantas has been successful as Australia's international flag carrier. The report says that Qantas's assets totalled $1,166,000 and that services operated to 39 cities in 24 countries. That clearly shows the great extent of Qantas's effect on the world in relation to the travel industry. Staff numbers totalled 12,234 and revenue for the financial year was $1,574m. A wholly-owned subsidiary of Qantas is a tour wholesaler and Qantas engages in other related activities as described in this report. The first two paragraphs of the letter dated 17 September 1985 from Mr J. B. Leslie, the Chairman of Qantas, to the Minister for Transport (Mr Peter Morris), as shown on page 4 of the report, clearly outline the way in which Qantas has performed over the period to which this report refers. The letter states: Dear Mr Morris, I am pleased to report that Qantas and its wholly-owned subsidiaries achieved a group profit of $147,916,000 in 1984-85 compared with a profit of $58,489,000 in 1983-84. The group operating profit, after tax, is the highest in the history of the Company. I think that says something for the company. It clearly shows that Qantas is performing in the way in which it should perform. Whilst some previous speakers have stated that Qantas was making only 4c profit in the dollar-I think that was the term used-the report clearly shows the activities of Qantas and the profits made by it. Qantas's revenue and its expenditure in relation to the training of new pilots and the purchase of new aircraft last year show very clearly that there is no case to be made by the Opposition for the sale or privatisation of Qantas, although the Opposition claims that Qantas is one of the companies throughout Australia that would be privatised or sold off if it were ever to come to government. I recommend the report to anyone who is interested in the aircraft industry. Under the heading `New Look for Qantas' the report talks about a program set up to develop the corporate identity of Qantas and about the Australian companies that were used in developing that identity. However, as one previous speaker said, it neglects to say anything about the development of uniforms. I made some comments on that matter the other day and I do not wish to go into it further at the moment. I think it is worth while noting, in relation to technical training, that the recruitment of pilots and flight engineers continued throughout the financial year 1984-85, with a total of 122 pilots and 36 flight engineers being trained. Training was undertaken in preparation for the introduction of the B767 aircraft and increased utilisation of the B747 and recruitment took place to compensate for Qantas's normal staff fall-off. I believe that the expenditure as outlined by Qantas for the training of new pilots and the purchase of new aeroplanes shows that Qantas next year will again be one of the world's leading international carriers. Question resolved in the affirmative. Senator SHORT(Victoria)(4.29) —I move: That the Senate take note of the paper. In the few minutes available to me I wish to confine my comments on the annual report of the Department of the Treasury to what I see as the need for better economic growth statistics in Australia. I am concerned about the increasingly misleading nature of certain of our key measurements of economic growth. I refer particularly to gross national expenditure, or GNE, as a measure of economic growth. In recent years an increasing part of GNE has been on deficit financed public administration and community services. This has had the effect of bloating the figures for the growth of GNE that the Government provides. The Treasurer (Mr Keating), for example, uses GNE figures as support for his fatuous claims that he has somehow defeated the business cycle. Gross national expenditure should no longer be taken to reflect the growth of the true growth potential, or the rise in national productivity and living standards. I would like to see the Treasury and the Australian Bureau of Statistics consider the preparation and publication of a measure of what I would call private domestic product which, in my view, would better reflect the genuine productive potential of the national economy. The definition of this concept, PDP, would be total gross domestic product in real terms, minus public administration, defence, community services, ownership of dwellings and customs duty adjustment. These items reflect wealth-using expenditures and not wealth-creating, productive, activities. The growth trend of PDP and PDP per capita has had a pronounced downward kink since about 1973. On a per capita basis, private domestic product-that is, in effect our private productive potential-grew by only 0.8 per cent per annum over the decade to 1982-83, compared with 3.1 per cent per annum in the decade 1962-63 to 1972-73. More recent figures than those for 1982-83 are not yet available. This sad fact appears to indicate that the Australian statistics system reflects the public interest in spending and a lack of interest in production. Whilst the bloated gross national expenditure figures are published with a time lag of only about four months, statistics for gross domestic product by industry are published after a lag of one or two years. I am indebted to Professor Wolfgang Kasper of the Royal Military College, Duntroon, for suggestions which formed the basis of my brief remarks today. I hope that professional economists and the relevant government authorities, including the Treasury, will give these suggestions careful consideration in the interest of providing a more accurate statistical guide to economic growth and productive potential in Australia. Question resolved in the affirmative. The ACTING DEPUTY PRESIDENT(Senator Tate) —Order! The time for the consideration of Government papers has expired. Senator LEWIS(Victoria) —by leave-I move: That the Senate take note of the paper. I seek leave to continue my remarks later. Leave granted; debate adjourned. Debate resumed from 14 October, on motion by Senator Gietzelt: That the Bills be now read a first time. Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Income Tax Legislation Senator JESSOP(South Australia)(4.35) —I take the opportunity on the first reading of the Taxation Laws Amendment Bill (No. 2) 1985 and allied Bills to refer to two matters that have been of concern to me. The first and perhaps most significant matter at this stage-I have taken an interest in this subject for some 12 months now-deals with an invention that has been developed in Victoria known as CADMAS, which stands for computer assisted disaster management system, which has been in the process of development privately for the last three years, with $3m being raised in order to develop that initiative. It seems to me that the Australian Government, and perhaps governments in the past, have failed to recognise the importance not only of developing Australian initiatives quickly, but also of taking advantage of the opportunities to develop export markets as a result of the world class research initiatives that are carried out in Australia. It is interesting to note that we take the lead in many areas of research. Our population is about 0.3 per cent of the total world population. Despite the small population in Australia, we produce about 2 per cent of world scientific papers. The inventors of CADMAS made an application under section 39 of the Industrial Research and Development Incentives Act, which provides for grants to be given for projects which are in the national public interest. I have raised this matter on previous occasions, and have asked the Minister concerned, the Minister for Industry, Technology and Commerce, Senator Button, whether he would take an interest in this matter to see that assistance was provided in order to develop this important initiative for the benefit of Australia. This project assists in national emergencies such as bushfires, floods and so on. Australia has always suffered from the effects of natural disasters, in particular from the effects of bushfires. In Victoria alone, for example, from 1926 to 1983, 228 lives were lost and property worth $1.986 billion was destroyed. As we know, bushfires on Ash Wednesday created havoc not only in Victoria but also in South Australia, with a consequent disastrous loss of life and property. Emergency services are always extended. On Ash Wednesday the co-ordinating office received no fewer than 57,000 telephone calls in a 24-hour period. Fifty-four thousand of those were recursive because nobody could answer the questions that were put. I understand that the Minister for Science (Mr Barry Jones) was initially impressed by the project and believed that it was suitable for assistance under section 39. He advised the company to make a submission to the Australian Industrial Research and Development Incentives Advisory Committee, known as AIRDIAC. The company spent a lot of time and money putting together its submission, which included a film. Mr Andrew Helps, the gentleman who conceived the scheme, one representative of BWD Instruments Pty Ltd and two representatives of another company which has spent about $2m to date came to Canberra for a meeting with AIRDIAC at which CADMAS was to be considered. To their dismay, they were not permitted to make a presentation to the Committee. Instead, I understand that two bureaucrats who had only a very scant knowledge of the complex system made the presentation on their behalf. I understand that at least one member of AIRDIAC was hostile to CADMAS and, in view of the firm to which he belonged, it is possible that Commonwealth support for the proposed project was discouraged. After a sub-committee hearing, Mr Helps received a letter from AIRDIAC which concluded that the Committee `was unable to recommend that the Commonwealth support the proposed CADMAS project'. However, it did recommend that CADMAS should be submitted to another committee-the Australian Industrial Research and Development Incentives Board. In other words, the company was being shuffled from one bureaucratic committee to another with a 12 months delay in the meantime. It is, therefore, not surprising that these entrepreneurs are now looking outside Australia for financial support. I understand that an American company is very interested in this proposition. A project such as this would generate significant export income. It is estimated that it could be worth over $100m a year to the company. This project would be developed in Australia with resulting job opportunities. I know that Mr Barry Jones supported the project initially and I think he still does. I believe that Senator Button is becoming more interested in it. Mr Jones, in fact, supported the project publicly on a television program not very long ago. I think that there are many other examples of this particular matter that need further government consideration and further government support. As I mentioned earlier, this project would be worth at least $100m in export income. It seems to me that at a time when our balance of payments deficit is becoming worse the Government should support this project. Only today I heard on a radio news service that the imbalance, the deficit, has increased by $122m. I received a telex today dealing with this subject of bushfire monitoring-the CADMAS project-and I would like to read it into Hansard for the benefit of the Senate. It reads: (1) BWD Industries Ltd has today issued a Press statement highlighting the lack of Federal Government resolve concerning the funding of research and development for the CADMAS project which involves a disaster management system of great national importance. (2) BWD made the original application for section 39 funding of CADMAS on 25 Nov. 83 and both that application and subsequent applications channelled through Andrew Helps have failed to elicit commitment or funding by the Government. (3) We have today telexed Senator Button and Barry Jones seeking their urgent re-examination of the funding of the CADMAS project. (4) Major benefits for Australia will derive from the funding and completion of this project (a) The Australian people will have the most advanced disaster management system in the world. (b) The resultant system will be exported to all disaster prone areas of the world, with substantial foreign currency earnings. (5) BWD Industries Ltd as a public company is determined, in the national interest, to find ways to complete the necessary research and development and to manage the completion of the project, working with all relevant institutions and with Mr Andrew Helps with whom we have a written agreement and with whom we have been associated for over two years. (6) Your assistance would be appreciated in getting the necessary parties to the conference table. I hope that that sort of meeting around the conference table will take place, if it has not already been arranged. That is just one example of an Australian initiative in danger of languishing because of the lack of government support for its development and lack of encouragement through the research grants committees that we have established. I am reminded, as a result of the death of Orson Wells, of another initiative that took place many years ago and that is the Nashua xerography technology. That particular xerography technology was developed in South Australia by Mr Metcalfe at the Defence Research Laboratory at Woodville. Unfortunately, due to lack of support, the Japanese took the initiative and developed it to their great financial benefit, and that export income was lost to Australia. I noted recently that, unfortunately, in the public expenditure area, according to Organisation for Economic Co-operation and Development figures of income spent by governments on research, Australia is No. 1. As the Minister for Science, Mr Jones, commented: `This is one first that I would rather not have'. It is rather sad that the contribution of private industry to research and development in Australia is very poor indeed compared with other countries. Perhaps in the past we have spent too much money on propping up some inefficient industrial sectors rather than spending the same billions of dollars that we have spent over the years on not only initial research assistance but also the development of those research initiatives that Australia is renowned for internationally. For every dollar one spends on initial research, there is a requirement to spend something of the order of $10 to develop the initiatives to a stage where they are a commercial and viable proposition. I think that we should go much further than that and, for each dollar spent on pure research, spend at least $10 to $20 on market establishment overseas and domestically. I believe that is where we have let down a lot of the entrepreneurs in Australia over many years. I ask the Government to have regard to that and in particular to the CADMAS project to which I referred. I hope that it will recognise that this could mean a considerable amount in export income and that it deserves the encouragement of the government instrumentalities that I referred to earlier in my speech. There was another matter that I wanted to refer to but I will leave my comments on that as I note that my time has almost run out. Senator CHILDS(New South Wales)(4.50) —We are discussing the Taxation Laws Amendment Bill (No. 2) 1985 and other income tax Bills. I would like to use this opportunity to refer to the Government's historic taxation statement, the Budget and other taxation matters because, as Treasurer Keating has pointed out, we have the most far-reaching reform of the Australian tax system being undertaken by the Labor Government at present, It is a reform that is desperately needed. Liberal and National Party senators have chosen to ignore the dire situation with which we were faced when we came to power-a situation left by the Fraser Government. I remind you, Mr Deputy President, of some of the things that we faced when we came into government. We faced an unemployment rate of 10.2 per cent and an inflation rate of 11.4 per cent. An increasing number of people were living in poverty. When we came into government the figure had gone up to three million people. We are now left to deal with these massive economic problems. We also had a tremendous crisis in the taxation system. There was widespread disillusionment with the taxation system and the great majority of Australians, the wage and salary earners, were becoming less and less a silent majority because they knew that massive tax avoidance and evasion by self-employed and wealthy people was going on. The growing inequality of the taxation system which occurred under the Fraser-Howard Government has been documented many times. I remind honourable senators of a few of the salient facts. From 1976 to 1981 wages and salaries increased by 97 per cent. However, personal income tax rose by 150 per cent. In comparison, the income rise for business, dividend and share owners rose by 125 per cent while their tax increase was only 75 per cent. That sums up the way in which the Fraser Government managed to push more and more of the taxation burden on to the backs of Australian wage and salary earners. But it was not simply the self-employed and the non-pay as you earn taxpayers who did well out of the Fraser-Howard regime. Upper income earners did well also. For example, the share of total income tax paid by people on double the average weekly earnings fell from 53 per cent in 1956-57 to a pathetic 16.5 per cent in 1981-82, which was the last year of the Fraser Government. People who earned $40,000 and upwards in today's terms used to contribute more than half the total income tax revenue in 1956. They now pay only one-seventh of that income tax. The reason for this is that upper income earners have been allowed to find more and more loopholes through which to escape taxation. Those loopholes were largely ignored by the Liberal Government and this caused huge losses to the taxation revenue. Estimates of the cost to revenue of evasion and avoidance range from $3 billion in 1979 to $4 billion in the last year of the Fraser Government. The options open to people to reduce their tax burden were many. For example, there were fringe benefits. People were able to hide income as tax free capital gains. There was the use of concessions and tax havens, as well as outright evasion of income, as shown by the huge loss of revenue caused by non-declaration of income from shares and dividends, and the use of bottom of the harbour type schemes. It is very significant that on page 3 of today's Australian Financial Review the following heading appears: `Jail terms for two seen as ``epitaph'' for the bottom-of-the-harbour era'. The Australian Financial Review reported yesterday's decision in which Brian James Maher, whose company, Commercial Securities Ltd, was probably Australia's biggest tax avoidance promoter in the 1970s, was found guilty of conspiracy to defraud and was sentenced to five years' gaol. Mr Justice Carter of the Queensland Supreme Court said: The real and ultimate victims were the millions of honest citizens of this country who bore the brunt of the loss (of millions of dollars) to the revenue. Of course, that case brings to an end a particular sphere of activity by the leading tax avoider of that period of the Fraser Government. Some of the methods used in the avoidance and evasion industry were sanctioned by the former Liberal Government. The methods included hiding income as a capital gain and the use of fringe benefits. This Government is rectifying those schemes. Some of the schemes were ignored by the former Liberal Government to the point where they developed to plague proportions. Some, like the corporate use of tax havens, were too frightening for the Liberal Party to contemplate when it was in government. More and more wage and salary earners were being alienated and increasingly outraged as their taxation burden increased and the inequalities became obvious. The whole concept of a tax system based on the principle of ability to pay had broken down. It was this situation that we set out to rectify. This situation brings about the Bills which are before us today. It is a situation that the Government's tax statement and the current Budget are set to change forever. We want to rectify this corrupt and unjust system. I commend the Government for having the courage to follow this course against the people who have tremendous wealth and who are screaming at the moment that they might be forced to pay their fair share. The principle involved-it is not a revolutionary principle, but the way these people protest one would think it was-is to broaden the concept of taxable income so that it is not only wage and salary earners who pay tax. This means that capital gains are to be treated as taxable income. Income earned from investment is to be taxed in the same way as income earned from labour; that is, the property developer who sits back and watches his property increase in value will now pay tax as does the labourer who earns his income through grinding hard work. More importantly, what was once a major way of avoiding income tax has now been eliminated by the introduction of a capital gains tax. These are the things that are taking place. This is the legislation that the Government is introducing. In broadening the concept of income we have also affected the use of fringe benefits as a method of tax avoidance. We have heard the cries of members of the Opposition as they react to their friends who protest about the Australian taxpayer refusing to continue to subsidise their meals-their wining and dining. Of course, this has to be addressed because the studies done on fringe benefits show how unevenly these benefits have been shared. When I talk about fringe benefits I am not talking about gaining small advantages such as subsidised canteen meals and discounted goods; I am talking about the big ticket items. The lurks to which I refer are low or no-interest personal housing loans; luxury housing for which little or no rent is paid; lavish entertainment allowances; fully paid air fares and holiday expenses; fully paid private school fees for children, and so on. These are the big money items that have become part of the life of wealthy people. The Social Welfare Research Centre at the University of New South Wales has indicated that the total value of lurks and perks grew rapidly over the Fraser-Howard period of government. They equalled about one-fifth of the total wage and salary bill for Australia. The top 10 per cent of income earners received one-third of the total value of these perks. The same study showed that the cost of these lurks and perks in 1980-81 was $5 billion; that is, about half the Government's expenditure on social welfare payments at that time. That is the extent of all those advantages and the distortion that the final years of the Fraser Government gave us. More recently, a survey in the Australian Financial Review last year showed that for executives earning $40,000 a year or more, the fringe benefits component was worth 25 per cent of their salary. Thus, one quarter of their earnings is effectively outside the reach of the tax commissioner. The tax survey showed that 94 per cent of these executives also drove a company car worth in excess of $16,000. We have recently heard the Opposition, led in this chamber by Senator Chaney, attack the welfare costs of the most poverty stricken group in our community, the single parent family. He and his Party have consistently ignored the massive loss to revenue sustained by the welfare sector because of what I have outlined. They have followed a policy of money for the greedy, not the needy. It now seems quite unacceptable for them to face the fact that things have changed and that we are trying to redistribute to people money that has been denied to the tax system for so long. What the Australian people need to know is that the morality which the Fraser Government represented in terms of tax avoidance and evasion is now going. There is a new morality in this country where people will pay their fair share. Wage and salary earners no longer have to face the fact that they are the only people genuinely paying, and all sorts of other people who have been able to use legal strategems are now not able to employ them. They must face the fact that in Australia, for the first time, all income will be taxed, with the chance of tax relief for wage and salary earners. The changes in the Bills which are now before the Senate and the first readings of which are being discussed are part of the process. We can now restore this faith to wage and salary earners. We have tried to share the tax burden. I believe that the Government will be thanked by the Australian people for the contribution it has made to changing the whole system of taxation. As a result of the Budget and the Government's taxation statement, we shall be putting Australia on a new path as far as taxation is concerned. Senator MacGIBBON(Queensland)(5.03) —The most important issue that faces a national government is the matter of national security. There is no more important duty that a government meets in its term of office. I wish to deal this afternoon briefly with one aspect of national security. I refer to the way our ability to maintain our security, our ability to live as free people in a society of our choosing, is being undermined by the active propaganda campaign run by the peace movement. It is a movement composed of diverse groups, which have slightly different declared goals but all with the same end point for Australia: The loss of freedom in our society as we know it. It is a peace movement that is actively aided by the Government in power-a Labor socialist government with its schizophrenic foreign policies, its impotent defence policies, and, above all, its absolute refusal to enter the public forum against the nuclear disarmers, the pacifists and all the fellow travellers in the peace movement caravan. The peace movements in Australia are dishonest both in name and in methods. There is no peace for mankind under the totalitarian regimes policies that would ensue if their policies were followed. Their methods are dishonest. They trade on the fears and ignorance of decent people. Most of the people in peace groups-90 per cent of them-are honest, decent, well-meaning people, but they are being used shamelessly by political manipulators at the heart of this movement. The peace movement has five failings. It has a false view of mankind; a false view of history; it is irresponsible in a literal sense; it promotes unilateral disarmament policies; and it is irrelevant to the security of Australia. All Australians want peace; the Liberal Party wants peace; the Australian Labor Party wants peace; I want peace. There is no argument at all about the goal that we seek, but there is a profound difference about the way we pursue that goal, the path we follow to attain it. It is a very difficult goal. The peace movement is presenting a false view of humanity. It is saying that it is easy to attain peace-that all one has to do is disarm and one can reach that goal through naivety. International relations are tough and hard; the law of the jungle is never far from the surface. Nations, like people, are subject to greed, insecurity, jealously and instability. Peace comes from being able to negotiate from a position of intellectual and physical strength. The intellectual bankruptcy of those in the peace movement and their arguments contrast greatly with the highly intelligent way they go about propagating their perverse ideology. The second point about the peace movement is that it takes a false view of history. In this century we have seen the two greatest wars, World War I and World War II, that mankind has been through. Tragically, there have been over 65 million deaths from those two conflicts. In the 40 years since World War II we have seen 65 regional wars. There are lessons to be learned from those wars, but they have not been learned by the peace movement. The striking example was the pacifist movement in Europe in the 1930s which led to Germany, Italy and Japan being emboldened to embark on the Second World War. The third point I charge the peace movement with is that it is irresponsible. It is targeted against the children of this country and gives those children no hope at all. Members of the peace movement tell Australian children that they face certain death within a few short years in a nuclear holocaust. There is not going to be a nuclear holocaust. There is a real possibility though that many of those children may die in other wars, and it is up to us to prevent those wars erupting. Nihilism and the consequent effect on the psychology of the youth of this country is the most irresponsible act that the peace movement gets up to. This can be seen in the lack of success of scholastic attainment in the schools, with children who will not work; lack of career ambition, unemployment, drug taking, and ultimately suicides in a number of cases. The peace movement must take part of the blame for this failure on the part of our youth. The young of this country should have an exuberant and idealistic hope in their own future and in the future of this country. I cannot stress strongly enough the irresponsible nature of the movement. Who are the agents for this attack on youth by the peace movement? First of all, the teachers unions and, secondly, the church groups. All the teachers unions in this country support peace studies through the States. Those peace studies are unbalanced. They do not put a balanced view on history, particularly on modern history or on the need to protect and defend one's own essential interests. Above all, they attack the sociology of this country and of the Western democracies. They portray the injustices of the world as being a consequence of the system we live under, whereas we live under a system that has provided the highest level of human rights in history, of individual freedom under a rule of law. They fail to contrast the achievements of our society and our culture with the totalitarian regimes and their psychiatric hospitals in Russia in which political prisoners are put, or with the re-education camps in Vietnam which again are filled with political opponents of the regime. They fail to say anything about man's inhumanity to man under the yoke of totalitarian regimes and they blame all the ills of mankind on our present system. In this they are joined by the churches, and none of the churches is immune from criticism in this respect. All the churches in Australia have political activists manipulating their functions within their parishes. They put their policies forward in their parishes with the apparent imprimatur of the church and they claim that they speak on behalf of the church and that they have a morally correct position. They claim that anyone who disagrees with them is not a Christian. Nothing could be further from the truth. The theologically correct position, the intellectually correct position and the morally correct position is that a society has the right to defend itself. But more than that society has the right and the obligation to protect the innocent and the weak. It cannot do otherwise in a civilised circumstance. That is why we have police forces for internal protection and national defence forces for protection in international relations. The fourth failing of the peace movement is that it is a unilateral movement. It is directed solely against the liberal Western democracies. The people in the peace movement know very well that they have no effect on the Soviets and their military policies. They come forward with this humbug of arguing that making unilateral gestures will lead to multilateral gestures, that somehow the Russians will follow suit if we unilaterally disarm. The Russians are neither pacifists nor philantropists. Those are their own words and can be quoted back to them. We will learn nothing, we will gain nothing by going down the path of unilaterally disarming. The fifth point about the peace movement is that it is irrelevant. It is utterly irrelevant to the peace and security of Australia. The members of the peace movement know that they are utterly irrelevant to the peace and security of Australia. They know that they have nothing at all to contribute in a constructive way to the peace of Australia. We cannot opt out of a nuclear age. We cannot unlearn nuclear physics. We cannot follow the actions or the thoughts of the emotionally and intellectually immature people who inhabit the peace movements. We cannot run away from the realities of the world. The great problems that face mankind cannot be met with the tactics and the propositions members of the peace movement are advancing. The world is a dangerous place, but it always has been. Our obligation and responsibility is to work constructively to reduce that danger, for it can be made safer. We have far too many weapons in this world and they are not only nuclear weapons. We have far too many conventional weapons. We need to reduce dramatically the number of those weapons. We must do that by a mutual, balanced and verifiable reduction. There must be a mutual reduction because unilateralism has no place at all. That reduction must be balanced because we must not give an advantage to one side and create instability. It must be verifiable because both sides need the security that comes from the knowledge of the other's position. That is not easy to bring about. It needs strength and patience. We must bring the East and the West to the negotiating table and we must have the patience to endure the years and years of careful negotiation which are involved in bringing some release of the tension. Above all we must be working to reduce the political tensions because the political tensions between East and West are the root of the problem. The arms we have, irrespective of the great superfluous numbers, are not the cause of the tension. The tension comes from two opposing and competing political ideologies. It is the resolution of this political insecurity and tension which will lead most effectively to arms reductions. As we know from our experience in this chamber, the reduction of political tension is not an impossible goal to pursue. It is very much an attainable goal over time if people are adult and reasoned in their approach. The difficulties and dangers of the world cannot be overcome by simplistic or naive gestures. They cannot be resolved by glib cliches or by moral cowardice. Yet the only proposals the peace movement advances for Australia are proposals that fall into those categories. Senator COONEY(Victoria)(5.14) —This being a first reading debate, perhaps we can be more flexible in what we say than we would normally be in debate. Before I get on to what I was going to say, perhaps I should say something about what Senator MacGibbon said. He made a large scale and grand attack upon all sorts of groups, including the churches. He said that none of them is exempt from criticism for the sorts of attitudes they take. It may just be that, they being Christian churches, the attitudes are based on the teachings of Christ. Senator MacGibbon may well look at that matter. I advise him to look at the source of those religions and see whether that source gives a basis for the sorts of things he has put forward-that we should, as it were, get ourselves into armed camps so that we can, with great trepidation, look across the no-man's-land, ready for the attack which must inevitably come. Senator MacGibbon said that we must bring East and West to the negotiating table. Everybody agrees with that. But how can he bring East and West to the negotiating table if he is going to label one side as being absolutely incapable of any sort of decency or ability to negotiate? To call for negotiations and then to create a condition, circumstances and a situation in which negotiations cannot take place seems to me to be naive. He said that we have to reduce the political tensions but he made a speech which, in effect, creates political tensions. Senator MacGibbon talked about simplistic gestures. Surely it must be a simplistic gesture to create political tensions and then to sit down with somebody with whom one has created those tensions and expect him to negotiate meaningfully. He said that he wants peace and I agree with him. He certainly does and so does everybody. But to get peace we have to give people credit where credit is due. We cannot go around labelling these people as drug takers, promoters of suicides and so on. We have to look as best we can to those parts of what they advocate that can be used to bring peace to the world. Are we going to have a situation where we have a tinder-box, where we feed more and more tinder into the box so that if a spark does take place there will be a terrible conflagration, or are we going to try to reduce the amount of tinder in the tinder-box so that ultimately there is nothing that will blow up? Of course we should not have unilateral disarmament. Of course we should have a realistic appraisal of each side. But of course we should realise, hope and pray that the two sides will get to the situation where there can be meaningful negotiations. We will certainly not be able to do that by lampooning, ridiculing and bringing into disrepute those elements in society which are needed for a true and lasting peace. I turn now to some remarks I want to make about the Taxation Laws Amendment Bill (No. 2), the Income Tax (Individuals) Bill, the Income Tax (Companies, Corporate Unit Trusts and Superannuation Funds) Bill and the Medicare Levy Bill which are presently before the Senate. These are tax Bills. They are directed towards raising revenue for the Government to carry on its operations. Governments cannot function if they do not have money to carry on their operations. That truism is illustrated by the fate of governments which have been denied Supply. There has been a history of that in this Parliament. Money and the mechanism by which it is raised and spent are vital to the viability of government. Anyone denying the proposition ignores reality. Accordingly, government must give great attention to economic factors-the sources of revenue, the objects of expenditure, the creation of wealth, the balance of payments, the inflow and outflow of finance from and to other countries, inflation and the rate of growth. On the other hand, to regard economic matters as the only or main concern of government or of the community within which it operates is to misconceive what society is all about. Freedom is more important than economic well-being. I think that point was implicit in what Senator MacGibbon said and I agree with him on that. I disagree strongly with the ways he suggested that we should go about doing that. In any event, freedom is more important than economic well-being. I do not want to undertake the exercise of defining freedom in this debate, which is limited, but most people have a good idea of what is meant by it. In its true sense it is a quality more valuable than economic well-being. Often freedom is dependent upon economic security, but freedom is the objective and economic security the means. It is not the reverse of that situation which is important. For example, deregulation may or may not be a good thing. I will not comment on that in the context of this speech. Indeed, whether it is good or bad may depend upon the circumstances in which it operates. But deregulation should not be seen as an end in itself. Freedom should not be seen as a means of creating wealth, making a profit or obtaining financial advantage. Deregulation is often argued in those terms. Deregulation is seen as a freedom for economic activity, as if freedom were the means and the economic activity the end. That is a reversal of the true situation. Production, trade and industry should be seen as an infrastructure for freedom. Good economics does not mean a good society. It may mean the opposite. Indeed it will mean the opposite unless a sense of morality informs the community. I will quote-it is certainly worth quoting-Richard Crossman who, in the early 1950s, wrote the following: Every economic system, whether capitalist or socialist, degenerates into a system of privilege and exploitation unless it is policed by a social morality, which can only reside in a minority of citizens. Every political party degenerates into office-seeking, unless its leaders are faced by an opposition within the ranks. Every church becomes a vested interest without its heretics, and every political system, including democracy, ossifies into an oligarchy. Freedom is always in danger and the majority of mankind will always acquiesce in its loss, unless a majority is willing to challenge-- or a minority is willing to challenge-- the privileges of the few and the apathy of the masses. He continued: We cannot fulfil it so long as we base our policy on the materialist fallacy that material progress makes men either free or equal. One particularly vicious form of this fallacy is the belief in social change and that if we achieve economic justice, we automatically secure human freedom. In that context I want to say that expressions used in debates on economics such as `cutting up the cake' and `increasing the size of the cake' raise concepts that put at risk the just, benign, society. They imply that what government is about is economic advantage. The concepts are expressed in other ways as well, such as the `need for a profit' and the `need for a reasonable economic reward'. It is not that these things are bad in themselves but they are given a primacy that tends to warp the concept of community. As President Kennedy said, let us not ask what the country can do for us but what we can do for the country. Concomitant with a process which demands more and more in economic terms for various interest groups is a process whereby those groups become more and more adversarial in their relations. Since gain is the objective, and there is only a certain amount to be gained, a battle breaks out amongst groups in society to demand what each sees as its just reward. Tax avoidance and evasion, demands for a greater and greater share of what is produced and an indifference, if not a hostility, to other groups in the same society are all syndromes of the malady of the predominance of economics. It is worth while in times such as this, when we are debating the first reading of some Bills, that such matters are brought into prominence. We can speak for as long as we like about who should get what, who should obtain the greater share of what is produced, who are the true producers and who are not, whether people should get tax free benefits and whether they should get a free lunch. We could talk for weeks about the injustices of those matters but, in the end, if we are to be a community which thinks purely in terms of a selfish end for each group within that community, we will not get anywhere. Senator MacGibbon said that people think too simplistically. I am not sure whether that is right. Perhaps we are not thinking simply enough. Perhaps we should be thinking more and more in terms of the old virtues. I go back to Senator MacGibbon's attack on peace groups and put in that context the concept I have of getting back to more simple and altruistic actions. When he slammed the peace movement he was slamming such people at Mahatma Gandhi and Martin Luther King. They may well have been naive but they initiated greater and, more particularly, more just reform in this world than the more hard-eyed and the more cynical negotiators we have around the tables who try, through a show of force, through a show of arms and through a show of aggression, to get peace. When one thinks about it, it is a concept which must ultimately fail because the means used to obtain the end are so aggressive that they can only cause a situation in which the holocaust-which Senator MacGibbon disavows-might well occur. With the amount of weapons and nuclear armament around, if the whole world is not blown apart certainly a most significant part of it will be. I conclude by saying: Let us look at the more basic virtues in society, the more basic humanity that people have, and reject the aggression that Senator MacGibbon said has been shown and get back to a more just society. We can do this only by having more just concepts. Senator HILL(South Australia)(5.26) —The Senate is debating a number of tax Bills at the first reading stage. In part they implement the Government's Budget. This again gives us an opportunity to review the Government's economic performance. I think it is fair to say that since the Government came to office there has been an improvement in the country's economic performance. We recognised that earlier and I do so again. Economic growth is around the 4 to 5 per cent level and there has been some employment growth. Yet despite the fanfare of trumpets and self-congratulations which this Government incorporates into every announcement of good economic news, the following should be remembered: The turnabout in economic activity has started from a very low base. The Hawke Government had at its disposal the beneficial effects of the previous Government's wage pause initiative, the breaking of the drought and the fortuitous turnaround in world economic activity. Even at growth rates of 4 and 5 per cent the economy will remain incapable of absorbing the unacceptably high levels of unemployment as long as the Government persists with its inflexible labour market policies. We are still uncompetitive internationally, with a strong likelihood that an expected rise in inflation will exacerbate our competitiveness problems. Although we hear from the Government about the importance of a strong and growing private sector, the Hawke Government remains a high taxing, big spending Government. In contradiction of the promises and assurances made by the Prime Minister (Mr Hawke) and the Treasurer (Mr Keating), real interest rates are the highest in 50 years and are continuing to rise. The sad fact is that this Government has for some time believed its own rhetoric. It is ignoring the warning signals at its own peril. Nowhere is this more apparent than in the 1985-86 Budget. Despite the personal income tax reductions made effective from November 1984, pay as you earn tax collections are estimated to increase by 11.6 per cent this year. Three-quarters of a million Australians will pay more tax this year because of what is euphemistically called fiscal drag. This is one of the heavy costs we pay for full wage indexation enshrined in the sacred accord. Wage indexation, without tax indexation, provides a ready and painless source of revenue for the Hawke Government. It is this ever-increasing hidden tax take which is helping to fund the reduction of the deficit to $4.9 billion, along with the one-off jump of a 20.8 per cent increase in non-taxation receipts generated by Reserve Bank of Australia foreign exchange earnings resulting from the depreciation of the Australian dollar. While the depreciation of the Australian dollar has brought a mild budgetary windfall, the Government remains incapable of addressing the issues which have led to the devaluation in the first place. Australia's current account deficit in 1984-85 was $10.2 billion and, as we have observed from today's Press, the position continues to deteriorate. It is this continuing deterioration in Australia's current account which even the Minister for Trade (Mr Dawkins) has identified as a major area of concern. The impact of this trend on the value of the Australian dollar was identified on page 12 of Budget Statement No. 1 with the following rather bland comment: External account developments and other factors contributed to a sharp depreciation of the $A in the second half of the year. Of course, Treasury does not elaborate on the other factors which contributed to a depreciation of the Australian dollar against the United States dollar of some 17.9 per cent on a trade weighted index basis. But I would suggest that if one were to hazard an educated guess, the factors mentioned would have included the MX missile debacle of February 1985 and the Government's indifference to the necessity of seeking any immediate discounting from prospective wage indexation rises for the effects of devaluation. On both counts the international financial markets found this Government wanting and passed the appropriate judgment. The consequences for the economy following from the depreciation are clearly set out in the Budget Papers. The Budget Statement on page 12 states: The $A depreciation has important implications for growth and inflation prospects. On the following page Treasury continues: The challenge for policy is to ensure that these unavoidable rises in the price level are quarantined. Prospects for sustaining growth beyond 1985-86 will be seriously impaired to the extent that this is not the case. Wage and price determination processes have a critical role to play here. In both areas, the prospects for both wages and prices during 1985-86 leave little cause for comfort. With regard to prices, the consumer price index is to increase by 8 per cent through 1985-86 and in year average terms. Inflation is therefore on the rise again, while the Organisation for Economic Co-operation and Development average inflation rate is forecast to remain under 5 per cent for the remainder of the financial year. The competitiveness gap between Australia and our major OECD trading partners is therefore widening to our disadvantage. Any competitive edge Australia may hope to obtain from the depreciation is under threat from wage increases which do not take account of the decline in the value of the dollar. The Treasurer, in his Budget Speech, made precisely this point when he warned: If the initial and full price effects of the depreciation were to be transmitted to wages via indexation decisions, our cost increases would noticeably exceed those of our major competitors for years to come. The Treasurer then announced the Government's attitude to wage discounting. He said: That is why, temporarily, we must modify our normal support for full wage indexation. He went on to say: . . . in the next two wage indexation cases the Government will argue before the Full Bench of the Conciliation and Arbitration Commission that the price effects of depreciation be taken into account. These are fine and sensible intentions which the Opposition had been urging on the Government back as early as May of this year. Yet the sense of relief which followed this statement temporarily blinded the business community to the implications of the statement which immediately followed when the Treasurer said: Before the case begins, the Commonwealth will meet with Unions and with employers to discuss the Government's approach. He continued: Within the framework of the accord, we will explore with the ACTU means by which any temporary loss of real income can over time be fully restored without doing damage to the economy. Of course, we now know what was the outcome of these discussions and explorations, principally with the ACTU. In the face of implacable ACTU opposition, this Government will not now argue before the Full Bench that the price effects of depreciation be taken into account. Instead we have been presented with a Government-ACTU deal which delays any discounting for a full six months. Even then, not only will 2 per cent discount of a May wage rise be offset by a 2 per cent tax cut in September 1986, but also the full weight of the Federal Government will be put behind a 3 per cent productivity rise in the form of a two year phased-in occupational superannuation scheme. In one stroke the Government has succeeded in keeping the accord operational at the expense of long term business confidence, profitability and investment. The Confederation of Australian Industry made clear what this deal means for the Australian economy when it said: The failure of the Government to grasp the nettle now will have a severe effect on the economy and on overseas perceptions of Australia. The ACTU has once again exploited its privileged position and the Government, rather than acting in the best interests of the community, has succumbed to ACTU pressure in an attempt to keep the accord alive. The tenuous presumption underlying this strategy-if it deserves to be called a strategy-is that the economy can in fact afford any productivity rises to be eaten up in higher business costs via occupational superannuation. Some six months after the depreciation we still see no evidence of the fall in the dollar's value providing any significant economic stimulus. Despite the depreciation, increased demand is being met by imports rather than domestic production. All we have is the expectation and hope that the depreciation should provide a boost to both import competing and exporting industries. But what if this does not in fact eventuate, or the boost in domestic production and productivity does not achieve the level which the Government hopes will form the basis for the 3 per cent productivity pay rise in the form of phased-in occupational superannuation? At best the economy will, by the middle of next year, be facing a delayed wage discount and the added cost burden of occupational superannuation. The business sector will be confronted with an 8 per cent inflation rate compared with an OECD average inflation rate of 5 per cent. The ACTU-Government deal therefore merely condemns Australia to a further period of international non-competitiveness. If anyone is in doubt as to what is at stake they need only to refer to the paper tabled by the Minister for Trade in the autumn parliamentary session which analysed Australia's past trade performance and future prospects. This document clearly identifies Australia's long term decline as a trading nation as a matter of serious concern. We note for example that over the past 30 years there has been a decline in the export gross domestic product ratio from 20 per cent to 13 per cent. What this means is that Australia's export sector has failed to provide an engine of growth for the economy. Yet, even in the 10 year period 1973-1983, 27 other economies have been able to increase their export GDP ratio. The paper contains other statistics. We also see that the international purchasing power of Australia's exports has increased only slowly over the past three decades. In the 10 years from 1973 to 1983 the purchasing power of our exports in fact declined at an annual rate of 1.4 per cent. Yet for 18 other nations for which comparable data is available for the same period, all increased their international export earning power at a faster rate than Australia. In fact, in the decade to 1983 only three countries recorded diminishing international export purchasing power, all of which were slower rates of decline than Australia's. I also remind the Senate that in 1953 Australia ranked eighth in the ladder of trading nations. We had slipped to twelfth by 1973, and in 1983 we were down to twenty-third in ranking. So the statistics continue. However, the most important decline in export market penetration has been in the western Pacific region, and this should be causing us particular concern. Declines have been experienced in Australia's export penetration into ASEAN and the People's Republic of China. The only bright spot has been the Republic of Korea. These statistics are well known but, I suggest, deserve repeating again and again because they emphasise the task that we face. The problem that we face now is the prospect that any chance we have to repair the poor trading performance of the past 30 years may well be frittered away by a government which finds itself incapable of adopting policies which address the fundamental structural problems of our international non-competitiveness. History may judge that in regard to our declining trade performance we failed to recognise these factors early enough, perhaps because of our dominance in food and mineral commodities. We failed to see the importance of the realities of a dynamic world demand for processed and value-added manufactured goods. Where do we go from here? The 1980s and 1990s clearly hold the prospect of lost export and competitive opportunities because this Government cannot see beyond the domestic imperatives of the prices and incomes accord. This is a matter of great regret for this country because opportunities that have been presented to us have not been grasped, they have been let go. Those opportunities may not come again to this country for a very long time. Senator CROWLEY(South Australia)(5.41) —As has been said by many honourable senators, we are now at the first reading stage of a package of taxation Bills. Senator Chipp —You would never know it. Senator CROWLEY —I will elaborate further for the edification of Senator Chipp. This legislation proposes, amongst other things, to amend existing legislation to effect a number of the Government's 1985-86 Budget proposals. For example, it will allow deductions of up to $1,000 per election for expenses incurred by candidates contesting local government and Australian Capital Territory House of Assembly elections. One may wonder why I draw attention to that. It is of particular relevance because I would like to spend my time talking about the benefits of the Government's improved economic performance, and I thank Senator Hill for his commending of the Government to that effect. Women in Australia are benefiting very much from the economic recovery and from the programs the Government has established for women since it came to office. I draw attention to this provision in particular because while women remain largely not taxpayers they are unable to benefit from a tax deduction for expenses incurred by candidates. It is certainly a matter to which women in my Party have given thought. How do we enable or enhance the chances of people to be candidates in local government and, in the case of the Australian Capital Territory, House of Assembly elections when a distinct cost is incurred? This provision is not necessarily a solution to the problem of finding a way around that cost. It is one step and I commend it but, as I say, it is available only to those who are taxpayers. The legislation also addresses, more specifically, changes to social security beneficiary rebates. This is of interest to anybody focusing on the problems confronting women in our society because so many women at present are on the list of social security recipients. The maximum rebates of tax and the taxable income levels at which the rebate begins to shade out for taxpayers will be changed and this will ensure that persons wholly or mainly dependent on social security benefits will not have to pay tax. That is a step that the Government instituted in a prior Budget and these changes will ensure that those benefits continue to be provided to social security beneficiaries. Recently in South Australia the Minister for Education, Senator Ryan, made in a speech a comment to which I alluded earlier: . . . our policies as a political party and as a Government recognise the fact that women in Australia have, for far too long, been deprived of the opportunities to participate in our society on an equal footing with men. We have, since coming to office in March 1983, directed our attention to providing women with the choices that should be available to every person who lives in a country like Australia which can offer a high standard of living, individual freedom and economic prosperity. The Government's approach to the provision of services and programs for women has been multi-dimensional but it is particularly through economic recovery, growth and stability that women will have a much greater chance of improving their status and will be in a much better position to take up the choices that are available. It is also important to note that women continue to constitute the largest group affected by poverty in this country; they feel the brunt of high unemployment rates and they are over-represented amongst those in receipt of pensions and benefits. Special initiatives that we can establish will assist, but of course such initiatives will benefit only a few. The Government, by putting Australia on a path to economic recovery and stability, is setting the stage for women to play a key role in Australia's economic, social and political life. One of the ways in which the Government has attended to this is by replacing the Office of the Status of Women into the Department of the Prime Minister and Cabinet, which it did in its first term. At the recent conference in Nairobi when Senator Pat Giles reported on the achievements of the Australian Government concerning women over the decade and described the effects of the Office of the Status of Women, particularly in regard to its overview role covering all policy areas affecting women, the number of delegates from other countries who came to ask us for some elaboration was telling. They were interested to hear that the Australian Government had established the Office of the Status of Women and given it an overview role, whereas some of their governments had established departments dealing directly with women's affairs. They were interested in the alternative way in which this Government is achieving and promoting rights for women. Many important announcements were made in the 1985-86 Budget but I would like to highlight some of particular relevance to women. I refer to the forward commitment of $107m over the next three years for the creation of an extra 20,000 child care places. A mix of child care places will be provided; that is, some will be in centres, some will be family based and some will be work based. Hopefully, the provision of those various sorts of child care will meet the range of needs of women in Australia. While other achievements for women, particularly improvements in educational and employment opportunities, can be encouraged, unless we have sufficient child care women may not be able to exercise their education and employment options. Further, child care is used by women who have other than education or work lifestyles; very often occasional care is of great benefit to women if they are involved in such things as hospital visits, or have medical appointments and so on. It is important to acknowledge that the 20,000 places the Government proposes in this Budget are in addition to the 24,000 places already created and will mean that the Government will have doubled the number of child care places available since it came to office in 1983. It is also important to note that for federally subsidised child care places parents pay their contribution on a needs basis and the poorest parent pays as little as $10 a week, that is, 25c an hour for 40 hours care per week. It is an opportune time to elaborate on the point, and I will say it again and again, that contrary to some criticisms the May statement did not reduce the number of child care places or services; both will increase. Other initiatives announced in the Budget address the Government's new strategy on youth policy and young women will benefit from that strategy as much as young men. That program is directed towards an area of considerable need. The unemployment left to us as a heritage of the Fraser years has certainly bitten very deeply into job prospects for young men and women in our society and I think this initiative is of particular relevance. I turn to the women's budget program. I preamble my comments by remembering a comment by Senator Walters on the night the Budget Papers were tabled in this place. Senator Walters's comment was not recorded in Hansard. On hearing that we had a special women's Budget program she said that we would be degraded by such a program. Of the women I know-I notice my colleague Senator Zakharov agreeing with me; we are in the process of consulting broadly in our own States and around Australia-and of the many we have spoken to none feel degraded by a special Budget paper addressing their needs. I must say that I found it a very curious comment; a displeasing and very wrong comment. I am also pleased to note that the South Australian Government this year released a similar document addressing the women's Budget programs in its 1985-86 Budget. I do not believe that all portfolio areas in the South Australian Government are yet covered by its women's budget paper but presumably it will follow the example of the Commonwealth Government and in one short 12-month period will move from having it in some portfolio areas to all. I will now address three areas in particular because of my interest in health and fitness. Within the Budget Papers there are some very interesting recommendations and descriptions of programs that cover the health and fitness needs of women in Australia. I was pleased to note earlier that Senator Cooney took up some of the outrageous comments by Senator MacGibbon that peace apparently is the cause of all war. One thing that he said that I found particularly offensive was that young people have no future in this country. He said that the peace movement is ensuring that they drop out of school, commit suicide and lie about doing nothing and, generally, are total wrecks and failures. Against that should be set the optimism of this Government's Budget Papers and programs-in particular its youth policy and its priority one program for youth. This Government does not accept that the comments by Senator MacGibbon are right. They are gross overstatements, but to the extent that there is disillusionment and disease in young people, which is far more attributable to unemployment than to the peace movement I am pleased to say that this Government and its Budget Papers, and in particular, its programs for men and women-but I would like to highlight those for women-take up that concern and propose policies for optimism and clear examples of this Government's concern. I will start with the health area. It is interesting to note what I suppose we have all known but is now nicely measured, namely, that women are the principal users of health care services. They take patients-themselves, their children or elderly folk-to the doctors. They are largely those who pay the bills and are counted so in the Medicare benefits schedules. It is quite interesting that women are the greater users of health care services. They also make up more than 70 per cent of the health care work force, particularly when the nursing profession is taken into account. The Government, through the Department of Health, recognising women as a group with particular health care needs, has focused on the health of women under a number of special headings. In particular, women have special health needs due to their ability to and their practice of bearing children. They also suffer special problems in health to a greater degree than men and very often they have less access to health services than do men. The problem of access is a real concern to the Department of Health. Attention is being given to ways of redressing that difficulty. Of course, special groups in our society, such as adolescents, Aboriginals and migrants have specific health needs. Women in those sub-sections also have those needs, but their needs are larger. I will come back to the problem of repetition strain injury if I have time. The Health Department contributed to the Australian Public Service task force inquiry into repetition strain injury. The Public Service figures for 1984-85 showed that 90 per cent of people suffering from RSI are women. Previous research had been done on telegraphists, for example. In earlier studies on which the Health Department drew, all the people investigated were men. Repetition strain injury is not a women's condition; it is a condition suffered by people who work in repetitive ways. Of course, it is much more a blue collar problem than a white collar problem, but it is still difficult to convince people of that. One of the other great gains in the Health Department was the transfer of nurse education from hospitals to colleges of advanced education. This will be of great benefit to all women who take up nursing as a profession. It will allow them to have a course of study matched more with the sorts of services required once they graduate and take on the task of providing nursing care in hospitals that are moving much more into high technology medicine, and in the community where community health dimensions in the past in hospital training have not been so extensively attended to. I convened for the Government a report on women in sport and the media. That report and other initiatives for women under the sport portfolio interests me because of the Government's awareness in that Department of the importance of access to health and fitness for women. The budget paper quite clearly documents how women are quite unequally represented in access to sporting and recreational facilities. Finally, I commend to honourable senators the budget paper addressing the Department of Employment and Industrial Relations and its National Occupational Health and Safety Commission in which, again, particular attention has been paid to the needs of women. In summary, every page of this women's budget document deserves our proper and thorough consideration. Senator Sir JOHN CARRICK(New South Wales)(5.56) —Beyond any doubt, the gravest problem confronting Australia today is the chronic high level of unemployment in our whole population, particularly for our young people. I will direct myself to that subject. The figures that I will use will be from either the Year Book of the Commonwealth or from the Parliamentary Library's monthly economic and social indicators. I commence by quoting from the body which advises the Hawke Government on economic matters, the Economic Planning Advisory Council. EPAC said recently: Australia will have to learn to live with unemployment levels at 8-9 per cent over the next 10 years. I point out that that statement was widely published. There was no rebuttal by the Government. Worse than that, there was no highlighting by the Government of the fact that it recognised that we have a major problem that will be projected over the next decade. It has been bad enough until now because in the almost three years of the Hawke Government unemployment has been running at between 9 per cent and 10 per cent. It is a little lower at the moment but still gravely high. By comparison, in the last two years of the Fraser Government, in 1981 unemployment was less than 6 per cent. In 1982 it averaged 6.7 per cent. Then, in 1983, which was dominated by the Hawke Government, the figure was 10.1 per cent. In 1984 it was 9 per cent, and in 1985, 8.4 per cent. I remind honourable senators that the National Economic Summit Conference within months of the Hawke Government's taking office in 1983 projected that there would be no real fall in unemployment in the next three years. But the matter is much more serious than that because the figures do not represent the true picture. The Prime Minister (Mr Hawke)-I take it that we can accept his figures-said in his policy speech that it was necessary each year to create at least 130,000 additional jobs just to allow for the increase in the population size. The Government has been in office between March and August of this year for a period-if one applies that test-in which it would have been necessary to have created 325,000 new jobs, not to have altered unemployment at all but simply to have allowed for population growth. I repeat that according to the Prime Minister 325,000 new jobs were needed to allow for population growth. But what do we find from the statistics? The labour force in March 1983 was 7,044,300. In August 1985 the labour force was 7,217,200. That means that over that period the addition to the labour force was only 172,990 persons on the basic figures, which have never been challenged, whereas, on the Prime Minister's figures, the labour force should have gone up by 325,000 just to mark time. In other words, there is a deficiency of 142,100 jobs in the number needed just to keep pace. The participation rate has been quite different over that period. The participation rate at March 1983, as shown by the figures provided by the Parliamentary Library, was 61.2 per cent. Rarely in the time of the Hawke Government has the participation rate been anywhere near that figure. I think it has, on Senator Button's figures, reached it in the last statistic, but-- Senator Button —Have you any idea of what you are trying to prove here, Senator? Senator Sir JOHN CARRICK —I can fully understand why Senator Button interjects. We will get right to the heart of this problem in a moment or two. What I am basically saying is this: The Prime Minister said that 325,000 new jobs would have to be created between March 1983 and August 1985 just to make up for the population growth, and Senator Button has acknowledged that statement. The fact of the matter is that the labour force has increased by only 172,990 and not by 325,000 at all. Here is a deficiency to start with. The basic deficiency lies in the fact that the participation rate has not been maintained. Throughout the years of the Hawke Government the participation rate has been well below 61.2 per cent and mostly in the 60 per cent range. Since Senator Button has taken a very keen interest in this matter, let me instance something dearer to his heart. In Australia over decades manufacturing industry has been the source of major employment. It was at its peak in the 1960s when it accounted for of the order of 28 per cent-I am estimating that figure; I may be wrong-of all employment. Senator Gietzelt —You have lost a third of it. Senator Sir JOHN CARRICK —More than that has been lost. But we have lost jobs-this will be of no joy to Senator Gietzelt's heart-mostly in Labor times. That is one of the sad situations. In the last 15 years-a big span in which there were two lots of government from the Australian Labor Party and from my side of politics-employment in the manufacturing industry has fallen from 1,301,639 to 1,154,400 in February of this year, presenting a loss of 147,239 jobs or a fall of 11.3 per cent. Senator Button —You lost about 100,000 of them when you threw them out in 1982. Senator Sir JOHN CARRICK —I knew that I would get Senator Button's adrenalin flowing. Some day his adrenalin has to flow if manufacturing industry is not to continue on the drastic decline that it is experiencing now. It is a tragedy indeed that there is such complacency about this situation. I acknowledge Senator Gietzelt's nod in acknowledging what I have said. In the 15 years to which I have referred the population increased by 20.7 per cent and jobs in manufacturing fell by 11.3 per cent. If manufacturing jobs had kept pace with the population the number would have gone up by 252,000. There would have been no unemployment if the trend had continued. Allowing for technology and for everything else-I know the kinds of arguments that will be raised-let me tell honourable senators the joy. Of the decline of 147,239 jobs in manufacturing 138,000 were shed in the last two years of the Whitlam Government. Indeed, manufacturing has continued to fall not only in numbers of people employed but also in the number of its industries. It ought to be on Hansard record that Senator Button laughs his heart out at that. When he, as the Minister responsible for employment and manufacturing, sees these figures, sees the basic decline which was built into the Whitlam Government's last two years, his response is to laugh. Senator Button —At you. Senator Sir JOHN CARRICK —No, his response is to laugh. He ought to be taking the matter seriously. He continues to laugh. The Australian Year Book gives no joy for laughter. The monthly summary from the Parliamentary Library gives no joy for laughter at all. Now Senator Button yawns. He is bored, as he has been with his portfolio the whole time. I ask honourable senators to name one occasion on which this Minister has made a significant statement in this Parliament indicating some real upgrading of manufacturing industry. It has occurred perhaps once or twice in the last three years. He does not show us any progress at all. Now, instead of 28 per cent-the Minister continues to yawn and the Australian community will record this well; I shall help it to do so-manufacturing industry's share of employment is down to 17 per cent and falling significantly. I know that the popular thing to say-I asked a question in this place and this was stated in reply-is: `We will get them in the service industries and in the tertiary industries'. I would like the Government to tell me how the service or the tertiary industries are going to provide the overseas export earnings to reduce that enormous albatross of debt which the Hawke Government has placed around our neck and which is now causing the great devaluation of the dollar, the great depreciation of Australia's currency in the eyes of everyone around the world. I would like the Government to say how this will happen. What will it do with our service industries? How will we create export goods and services? The silence on this matter is deafening. Senator Button —You and your friends told us about the minerals boom. You talked up Rundle shares in here. Senator Sir JOHN CARRICK —Mr Acting Deputy President, Senator Button knows that I was the Minister who exposed in this Parliament what had happened in Rundle and that as a result of my exposure Rundle shares fell. They fell during my time and they rose before my time. I have contempt for the Minister's dishonesty in presenting that case, because the facts are clear. I found that the presentation to the public-Mr Acting Deputy President nods at this-was wrong so I gave the facts in the Senate and as a result Rundle shares fell. The Minister is displaying patent dishonesty. He gets excited now. If he would only get excited about manufacturing and jobs in manufacturing as he does about his dishonesty, perhaps the country would see something. I hold him in contempt for making a statement that he knew to be dishonest. He was Leader of the Opposition at the time and he was sitting in the Senate when I made my statement about Rundle. He knows that what he has said is untrue. He knows that his dirt digger, Senator Walsh, has pedalled this untruth, as has Senator Grimes. He knows, therefore, that all he can do when he is faced with the story of the decline in manufacturing, the tragedy of the situation, is to throw dirt. Let him try to throw dirt. I have challenged him and others to do that. If that is his way, so be it. The Minister is part of a government which acknowledges the statement by EPAC that for a further 10 years we will have unemployment at the rate of 8 or 9 per cent. There has been no denial of that fact. That figure represents three-quarters of a million people who will be unemployed. That means there will be chronic unemployment for two or three generations. But the Minister laughs and yawns at this situation. All he can do is try to make a snide, dishonest and untrue quip. He did not succeed. The fact is that unemployment lies heavily on his plate. Employment ought to be built up under his portfolio. There should be an upsurge in export industry. His record in that portfolio is one of abject failure. Manufacturing industry is closing down. Philips Industries is leaving the manufacture of television sets. Bit by bit our industries are shrinking. And the Minister grins. That is his answer to this tragedy. The ACTING DEPUTY PRESIDENT(Senator Tate) —Order! The honourable senator's time has expired. Question resolved in the affirmative. Bills read a first time. Senator BUTTON(Victoria-Minister for Industry, Technology and Commerce)(6.12) —I move: That the Bills be now read a second time. I seek leave to incorporate the second reading speeches in Hansard. Leave granted. The speeches read as follows- TAXATION LAWS AMENDMENT BILL (No. 2) 1985 This Bill is the first in a package of 4 Bills. It will amend the various taxation laws in several respects. The Bill proposes amendments of the income tax law to give effect to the Government's decisions to counter the use of non-leveraged finance leases and similar arrangements to achieve tax benefits. It will introduce statutory loan-back rules that employer-sponsored superannuation funds will be required to follow to secure relevant tax concessions. This Bill will also give effect to a number of the Government's 1985-86 Budget proposals. Among these is the increase in two superannuation-related monetary limits that apply for income tax purposes. Further, it will authorise income tax deductions for gifts made to the Australian Academy of the Humanities and to the Royal Australian and New Zealand College of Psychiatrists. The Bill will amend the income tax law to allow a deduction of up to $1,000 per election for expenses incurred by candidates contesting elections to local government or to the Australian Capital Territory House of Assembly. One of the three measures this Government has announced to assist the horse racing industry-the exemption from income tax of the income of animal racing clubs-will be given effect by this Bill. For persons wholly or mainly dependent on social security unemployment, sickness or special benefits the Bill will increase the income threshold below which they will not be required to pay tax. As is customary at Budget time, this Bill will also provide the basis for calculation of provisional tax for the 1985-86 year of income. Also included in the Bill are the amendments to give effect to the measure announced on 17 July 1985 to replace the existing concessional expenditure rebate for eligible expenditure exceeding $2,000 with a rebate for net medical expenses exceeding $1,000. The Bill will also amend the Taxation Administration Act to provide for co-operation with the States and the Territories in the administration of their revenue laws. The secrecy provisions of various taxation laws administered by the Commissioner of Taxation are to be amended to cover persons such as those from another country performing duties while on attachment to the Australian Taxation Office. And finally, the Bill will make a number of minor technical amendments of the taxation laws. Mr President, I now turn to outline in more detail the more significant measures contained in this Bill. Non-Leveraged Finance Leasing and Similar Arrangements Measures announced on 15 May and 16 December 1984 to treat, for income tax purposes, certain non-leveraged finance leases and similar arrangements as though they were loans by the lessor to enable the lessee or user to acquire the leased property are to be implemented by this Bill. Under the arrangements in question, the lessor passes on to a lessee such as a tax-exempt body, in the form of lower lease rentals, some of the tax benefits that would be available to the body if it owned the property and were subject to tax. At the same time, the tax-exempt body assumes most of the risks and benefits associated with ownership of the leased property. By amendments proposed in the Bill, the lessor will be denied income tax deductions in respect of capital expenditure on property that is the subject of such an arrangement. Instead, the lease payments made to the lessor will be treated as consisting of non-taxable repayments of principal and taxable payments of interest. Deductions for interest on moneys borrowed to fund the capital expenditure will not be affected. These measures will mean that the tax advantages, and therefore substantial revenue losses, associated with the use of these arrangements will be removed. In more detail, the measures are to apply where plant, equipment or other property is leased under a finance lease either to a government or tax-exempt government authority or to a person who uses the property outside Australia to produce income that is not subject to Australian income tax. They will also apply where such property, although not leased, is the subject of an arrangement having the hallmarks of a finance lease. The amending legislation contains tests as to whether an arrangement is a finance lease or similar arrangement. These tests are based on those developed for accounting and commercial purposes and are aimed at determining whether all, or substantially all, of the risks and benefits associated with ownership of the subject property are transferred from the lessor to the lessee. It is estimated that the measures will result in a tax saving in excess of $100 million in 1985-86 and even larger amounts in subsequent years. Statutory Loan-back Rules This Bill will give effect to the government's decision, announced on 11 March 1985, to introduce statutory rules to apply to certain investments by employer-sponsored superannuation funds. Mr President, that decision reflects the government's concern that excessive investment by a superannuation fund in the sponsoring employer's business may mean, in the event of the failure of that business, that employees lose not only their jobs, but also their superannuation entitlements. This concern was shared by the Commonwealth Task Force on occupation superannuation, the Asprey Taxation Review Committee, the Hancock National Superannuation Committee and the Campbell Committee of inquiry into the Australian financial system. The basic rule contained in the Bill adopts the recommendation of the Commonwealth Task Force. This is, that not more than 10 per cent of the assets (measured at cost) of an employer-sponsored superannuation fund should consist of equities in, or loans to, the employer or associated persons or entities. For funds established after 11 March 1985, that basic rule is to first apply for the 1985-86 year of income. For funds in existence at 11 March 1985, a special transitional rule will apply over the 10 year period ending with the 1994-95 year of income. The special transitional rule will limit employer investment by such a fund to the greater of 10 per cent of the fund's assets or the level of investment as at 11 March 1985. That rule will allow those funds in existence at 11 March 1985, that would otherwise breach the 10 per cent investment restriction, to comply with the basic rule by way of natural growth, so avoiding significant re-financing problems for some businesses. Mr President, in announcing the government's decision to introduce statutory loan-back rules for employer-sponsored superannuation funds, the treasurer stated that the consequences of non-compliance would be that the investment income of the fund would be taxed at the rate of 60 per cent, that employer contributions would not be deductible and that member contributions would be neither deductible nor rebatable. The no-rebate consequence for member contributions is no longer relevant following the government's decision to abolish the concessional expenditure rebate. The no deduction consequence for both employer and member contributions will, however, remain. On further consideration the government has decided that the announced penalty tax rate of 60 per cent on the investment income of non-complying funds is inappropriate. Having regard to the non-deductibility of contributions and to the fact that payments to members-either in the form of pensions or lump sum termination payments-will be subject to tax, it has been decided that a more appropriate rate of tax is 30 per cent. That rate is being imposed by another Bill that I will shortly introduce. The new rules are not there for revenue-raising purposes, but are designed to protect members' benefits by encouraging superannuation funds to restrict the level of their investments in sponsoring employers. The amendments should therefore have little effect on the revenue. Superannuation Contributions The Bill will give effect to a 1985-86 Budget proposal to increase from $1,200 to $1,500 the maximum annual income tax deduction allowable for contributions to approved superannuation funds by self-employed persons or employees not covered by employer-funded schemes. The increase is to apply for the 1985-86 and subsequent income years. The estimated revenue cost of this measure is nil in 1985-86, $14 million in 1986-87 and $10 million in 1987-88. Lump Sum Termination Payments The Bill will also increase the amount of lump sum superannuation and kindred payments relating to the period after 30 June 1983 that is taxed at the concessional rate of not more that 15 per cent. Under the existing law, the first $50,000 of such payments made to a person aged 55 or more qualifies for the 15 per cent rate of tax. As announced in the 1985-86 Budget, that limit is being increased to $55,000 for the 1985-86 and subsequent income years. This particular measure will cost an estimated $500,000 in 1985-86, increasing to $8 million per annum in future years when relevant payments are wholly attributable to the period after 30 June 1983. Concessional Expenditure Rebate and Medical Expenses Rebate The Draft White Paper on tax reform canvassed the abolition of the concessional expenditure rebate and its replacement with a rebate for medical expenses. On 17 July 1985 the Treasurer announced that the Government had decided to proceed with this proposal in relation to the 1985-86 and subsequent income years. This Bill will give effect to that decision. As indicated at that time only about 6 per cent of taxpayers incur sufficient expenses to benefit from the concessional expenditure rebate. It was also noted that most of the items under the rebate already receive substantial government assistance in other ways and that it was therefore inappropriate to provide assistance to a small section of the community by way of a tax rebate. However, the Government also recognised a continuing need for some assistance to those incurring high unreimbursed medical expenses and has therefore decided to introduce a new medical expense rebate for net outgoings exceeding $1,000. This rebate will apply to the existing range of medical expenses which form part of the concessional expenditure rebate, including payments to medical practitioners, nurses, hospitals and chemists in respect of an illness or operation and payments for dental and optical treatment. The decision to abolish the concessional rebate requires some consequential amendments, one of which I particularly draw to the attention of honourable senators. Under existing arrangements the first $250 of the net amount of self-education expenses necessarily incurred in connection with a prescribed course of education is absorbed by the concessional expenditure rebate provisions, leaving the general deduction provision of the income tax law, where it has application, to allow a deduction only for the balance of such expenditure. Provisions in this Bill will ensure that, with the abolition of the concessional expenditure rebate, a taxpayer's entitlement to a deduction for relevant self-education expenses will continue to fall for consideration under the general deduction provision of the Income Tax Law only to the extent such expenses exceed $250. The net gain to revenue from these measures is estimated at $15 million for 1985-86 and $60 million in 1986-87 and subsequent years. Animal Racing Clubs In his Budget Speech the Treasurer foreshadowed three measures designed to assist the horse racing industry. This Bill will give effect to one of those measures by amending the income tax law to exempt from income tax the income derived by animal racing clubs. The exemption will apply primarily to horse and greyhound racing clubs. Consistent with the exemption currently applying to clubs conducting athletic sports, it will not apply to clubs the activities of which are predominantly social in nature or that are carried on for the purposes of profit or gain to individual members. The exemption is to apply for the 1985-86 and subsequent years of income. The estimated revenue cost of this measure is nil in 1985-86 and $1 million for a full year. Local Government Election Expenses This Bill will implement the Budget proposal to allow, in 1985-86 and subsequent income years, a deduction of up to $1,000 for expenditure incurred in contesting local government elections. The deduction will also be available to candidates for the Australian Capital Territory House of Assembly. The present income tax law includes in assessable income the amount of any election expenditure that has been allowed as a deduction to a candidate for this Parliament or a State parliament, and which is reimbursed or paid on the candidate's behalf. Similar provisions are included in this Bill in relation to candidates for local government elections. However, because of the $1,000 ceiling proposed, the provisions in this Bill will effectively ensure that relevant payments will be included in a candidate's assessable income only to the extent that they exceed the amount of total expenditure incurred in relation to a particular election which has not been allowed as a deduction. The Budget announcement on this matter indicated that the allowance of a deduction for election expenses would be subject to verification of the expenditure. Provisions to this effect are not contained in this Bill but will be taken up in the context of the substantiation rules the Treasurer announced in his statement on tax reform. It is estimated that the cost of this measure will be nil in 1985-86 and $2 million in a full year. Social Security Beneficiary Rebates As announced in the Budget Speech, the maximum rebates of tax and the taxable income levels at which the rebates begin to shade-out for taxpayers in receipt of social security unemployment, sickness or special benefits, are to be increased with effect from 1 July 1985. The rebates will continue to ensure that persons wholly or mainly dependent on social security benefits do not have to pay tax. For married beneficiaries the maximum rebate will be increased from $75 to $220 and no tax will be payable in 1985-86 on taxable incomes up to $8,795. For other beneficiaries the maximum rebate will increase from $50 to $170 and no tax will be payable on taxable incomes up to $5 275. The rebates will shade-out above those income levels, resulting in some rebate being available until the 1985-86 taxable income exceeds $10 555 for married beneficiaries and $6 635 for other beneficiaries. The cost to revenue of this measure is estimated at nil for 1985-86 and $9 million for a full year. Gifts The Bill will amend the gift provisions of the Income Tax Law to give effect to the decision announced in the 1985-86 Budget to allow deductions for gifts made after 20 August 1985 to the Australian Academy of the Humanities and to the Royal Australian and New Zealand College of Psychiatrists. The cost to revenue of this measure is estimated at nil for 1985-86 and less than $200 000 in a full year. Provisional Tax for 1985-86 As provisional tax is part of the pay-as-you-earn system and is designed to collect tax on income other than salary and wage income within the year in which the income is derived, it is generally accepted that the amount of provisional tax charged should approximate as closely as practicable the amount of tax actually imposed for the year. Incomes for 1985-86 are expected to be higher than for 1984-85 and, due to the changes to the personal income tax rate scale that applied from 1 November 1984, effective rates of tax for 1985-86 will be lower than for last year. Accordingly, as in past years, it is proposed to vary the basis of calculating provisional tax for 1985-86 to be notified in assessment notices to issue this year. This Bill provides for 1985-86 provisional tax to be calculated on the basis of 1984-85 taxable income increased by 11 per cent and by applying the lower rates of tax for 1985-86. Also reflected in the provisional tax calculation will be the Medicare levy of one per cent. The removal of the ceiling on the maximum amount of levy payable by a taxpayer or by a married couple and the increased low income thresholds to apply for levy purposes in 1985-86 will be taken into account. Generally rebates and credits will be allowed in the provisional tax calculation at the levels allowed in 1984-85 assessments. However, the concessional expenditure rebate allowed to a taxpayer in 1984-85 will not be allowed in the provisional tax calculation. This rebate is to be removed effective for the 1985-86 and subsequent years. Taxpayers will continue to have the right to ``Self-assess'' and have the provisional tax for 1985-86 recalculated on the basis of their own estimates in appropriate circumstances. Co-Operation Between Commonwealth, State and Territory Revenue Authorities Measures announced on 20 December 1983 to assist the States and the Northern Territory to counter avoidance and evasion of State and Territory taxes are contained in the Bill. The Commissioner of Taxation is to be empowered, on request by a State or the Northern Territory Revenue Authority, to authorise a Commonwealth, State or Northern Territory taxation officer to conduct in the Australian Capital Territory an investigation for the purposes of a State or Northern Territory taxation law. For that purpose, the authorised officer will have investigation powers similar to those a Commonwealth taxation officer has for Commonwealth purposes. The commissioner will also be able to require persons to furnish information or produce documents that are relevant to such an investigation. State and Northern Territory taxation officers will be under the obligation to maintain secrecy in relation to information obtained while undertaking investigations in the A.C.T. The Commissioner will further be authorised to provide Commonwealth taxation information to State and Territory taxation officers to enable them to administer their laws, if those laws provide reciprocal rights for the Commissioner. For the purposes of these co-operative measures, the Bill provides that, in proceedings relating to federal taxation laws, an appropriately certified true copy of, or extract from, an original document that is obtained under a State, Territory or Commonwealth taxation law will generally be admissible as evidence as if it were the original document. To ensure that these measures are fully effective, it will be necessary for the States and the Northern Territory to introduce complementary legislation. The practical application of co-operation will require some Australian Taxation Office resources, but the additional administrative costs should be offset by the revenue yield from reciprocal State and Territory co-operation. Secrecy Provisions Mr President, under the taxation secrecy provisions, taxation officers are, except in carrying out their duties or in other specified circumstances, prohibited from disclosing confidential taxation information. That prohibition extends to all other persons appointed or employed by the Commonwealth. The income tax secrecy provisions were amended last year to ensure their application to persons such as those from overseas countries working in the Taxation Office under exchange arrangements. These persons are neither appointed nor employed by the Commonwealth. The secrecy provisions of the various other laws administered by the Commissioner of Taxation are, by this Bill, to be amended in a similar fashion. The amendments will have no effect on the revenue. Mr President, a detailed explanation of each provision of the Bill is contained in the memorandum being made available to honourable senators. I commend the Bill to the Senate. Income Tax (Individuals) Bill 1985 This is an annual measure which formally imposes personal income tax rates for the current financial year. The rates imposed by this Bill are those declared for the 1985-86 financial year in the Income Tax (Rates) Act 1982. The rates for 1985-86 reflect, for the full year, the significant cuts in personal income tax which were announced in the 1984-85 Budget and have applied since 1 November 1984. The full year effect of those tax cuts will result in a reduction in tax payable, on equivalent taxable incomes. In 1985-86 assessments as compared with 1984-85 assessments. A five step tax scale applies. At the lower end of the scale for resident taxpayers, no tax is payable on taxable incomes up to $4,595. On taxable incomes in the range $4,596 to $12,500 the rate is 25 per cent. In the range $12,501 to $19,500 the rate is 30 per cent and increases to 46 per cent in the range $19,501 to $28,000. To 48 per cent in the range $28,001 to $35,000 and to 60 per cent on income in excess of $35,000. These general rates also apply to non-residents who receive Australian Social Security and Repatriation pensions that are taxable in Australia, or who were residents at any time during the income year. For all other non-resident taxpayers, the standard rate of 30 per cent applies to incomes up to $19,500 and the general rates apply to income above that level. The rate of 46 per cent or higher continues to apply to certain types of income derived by some unmarried minors. Similarly, the $417 income threshold at which tax is payable by resident minors on that income and the associated shading-in arrangements remain unchanged. The full year effect of the tax scale will be reflected in provisional tax payable for 1985-86, which is also formally imposed by this Bill. I commend the Bill to the Senate. INCOME TAX (COMPANIES, CORPORATE UNIT TRUST AND SUPERANNUATION FUNDS) BILL 1985 This Bill will formally impose Income Tax for 1985-86 on the 1984-85 taxable income of companies, registered organisations and unit trusts treated as companies for tax purposes. It also imposes tax on the current year taxable income of Superannuation Funds, ineligible approved deposit funds and trust income of non-resident company beneficiaries. The rates of tax are also declared by the Bill. Except for the imposition of income tax at the rate of 30 per cent on the investment income of employer-sponsored superannuation funds that fail to meet the loan-back rules, the rates are the same as for 1984-85. The provisions of the Bill follow the format of other years and details of the various rates are set out in the explanatory memorandum that is being made available to honourable senators. I commend the Bill to the Senate. MEDICARE LEVY BILL 1985 The Medicare Levy Bill 1985 will declare the basic rate of Medicare levy for 1985-86 and, until the Parliament otherwise provides, for 1986-87. The basic rate will be 1 per cent of taxable income. The Bill reflects the removal of the ceiling on the amount of levy payable, and contains the income threshold levels below which people with low incomes will not be called on to pay any levy. In addition, it contains rules for reducing the levy otherwise payable by veterans, war widows, Defence Force personnel, and certain other `prescribed persons' who are exempt from the levy for part of a year, or who are required to pay levy because they have dependants eligible for Medicare benefits. From 1 July 1985, there will be no ceiling on the amount of levy payable by an individual or a married couple. In order to continue to shelter low income earners from the levy, the income thresholds at which levy becomes payable are to be increased from 1 July 1985. For 1985-86, individuals with taxable incomes of $7,526 or less, and married couples or sole parents with family incomes of $12,504 or less, will be exempt from the levy. The income threshold for married couples and sole parents will increase by a further $1,530 for each dependent child or student. For example, a married couple with two dependent children will pay no levy until their combined taxable incomes exceed $15,564. The estimated cost of the increased low income thresholds is $10m in 1985-86 and $15m in a full year. The gain to revenue from the removal of the ceiling is $7m in 1985-86 and $12m in a full year. New tax instalment schedules to reflect the changes to the Medicare levy arrangements are being prepared and will be released as soon as possible to enable employers to incorporate the changes in their pay-roll procedures before 1 November. These new schedules will also reflect the change in the scale of deductions to be made from second job income of more than $7,000 ($134 per week), details of which were contained in statement No. 4 to the Budget Papers. Explanations of the Bill are contained in the explanatory memorandum which is being made available to honourable senators. I commend the Bill to the Senate. Senator MESSNER(South Australia)(6.12) —The Senate is debating four allied Bills which all concern taxation measures. They arise chiefly out of the Budget, but some other matters are concerned as well. I would like to discuss firstly one element of the Taxation Laws Amendment Bill (No. 2) 1985 in connection with non-leveraged leasing, which represents an area on which I would like some clarification from the Government as to what it actually intends. This is a complex area which was generated chiefly by the activities of the New South Wales Government some years ago in the establishment of the Eraring power station and the financial arrangements in connection with that. The former Government looked into the provision of legislation in respect of the negative gearing arrangements. Of course, because there have been formal announcements about this matter it is now being dealt with in this Bill. Statements were made by the Treasurer (Mr Keating) on 15 May 1984 about the financial benefits to the lessee and the lessor, which in turn led to a substantial loss of Commonwealth revenue, because the lessor or the owner of the property in these circumstances was a tax exempt body. Many examples have been given in stories concerning the Commonwealth Superannuation Investment Trust and other such organisations that have taken part in these kinds of activities. I seek clarification from the Government in regard to the problem of repairs. The relevant part of the legislation states that where it is demonstrated that a tax exempt body is allowing repairs to be undertaken-presumably, and this is the crux of the matter, they are repairs of a capital nature, of an improvement nature-if those repairs are undertaken by the lessee, this will lead to a non-allowance of expenses-depreciation, for example-of the lessor. The point that has been raised with me by people who are involved in these kinds of transactions is that repairs undertaken can be of a non-capital nature, but it is quite possible that the nature of the repairs is such that there is some dubious element. Of course, the Commissioner of Taxation does review these things from time to time and forms his own opinion about the nature of repairs. Those matters have been the subject of litigation over a long period. We are trying to find out where the line can be drawn in terms of repairs being undertaken by the lessee without jeopardising an arrangement which otherwise is quite legitimate. I make the point that section 53 of the Income Tax Assessment Act presently refers to the allowance for repairs and replacement of worn-out items of plant. It is the general provision relating to those kinds of deductions. It does refer to non-capital items. I wonder whether the Government has given consideration to the incorporation of a similar provision in this legislation, whether it has some other solution to the problem, or whether it does not regard the matter as being a problem. I would like to hear from the Minister for Finance (Senator Walsh) about that, because I believe it could be significant in respect of legitimate leverage leasing arrangements. The other parts of the legislation represent chiefly that part of the Government's Budget which was announced on 23 August, which did not reach any kind of conclusion before the Government brought down the second part of its tax package on 19 September. Of course, we note that that second statement from the Treasurer is nothing but a grab-bag of confused, contradictory measures which does not include any legislation. We cannot really debate the matter in detail until that legislation is before us. I would like to hear from the Minister when he expects that that legislation might be put before the Senate. It is, of course, a matter of great importance to the community that we find out exactly where we stand in relation to the Government's package and what is really meant by the various comments that were made by the Treasurer in the course of his statement a few weeks ago. There is a great deal of confusion about matters such as how the fringe benefits tax will be applied. Queries have been raised in regard to the capital gains tax and how that might apply in relation to goodwill, and how the capital gains tax will apply in the area that I have just spoken about, in regard to leverage leasing arrangements, when a lessee disposes of a property at the expiration of the lease. The Minister might be able to give us some advice about that point. It seems to me that in regard to a property which has a residual value and which is written down quite substantially, if at the time of the expiration of the lease the value of the property on the market is substantially greater than the residual value, obviously a capital gain does accrue. I ask whether in the future that will be subject to the income tax law in the normal way or whether that is now to be subject to the new capital gains tax. One of the concerns on that point arises in regard to transport property. This is a very considerable element when we consider the semi-trailer owner-driver who leases his vehicle, which has a residual value. He has a lease for, let us say, five years, and over that period continues to make his lease payments on time, gets to the end of the lease and finds that the residual value is quite low. At the point that he comes to trade in that vehicle upon a new vehicle five years later, even with the normal course of inflation and bearing in mind that most of this equipment is imported and therefore rising in price as the value of the Australian dollar falls, he will have to meet a substantially greater difference between the residual value plus any profit he might make upon the trade-in value of that truck and the purchase price of any new vehicle. In that situation where the lessee merely rolls over the equity that he has acquired from the trade-in of his old truck on a new vehicle, will any profit over and above the residual be subject to the capital gains tax? If so, it seems to me that that will substantially reduce his capacity to find a deposit on the purchase of the new vehicle, especially in the light of the points I have mentioned in connection with rising prices over a five-year period and so on. That being so, does the principle also apply to other kinds of leveraged leasing or other leasing arrangements and, in particular, the ones to which we have just referred. Other parts of the Taxation Laws Amendment Bill (No. 2) introduce certain standards for statutory loan back requirements for what are known as internal superannuation funds. All of us in the Senate would be anxious that where companies, particularly small companies, build up equity in superannuation funds for staff members who are members of that fund, those benefits are secured to the greatest extent possible. Certainly it is true that there has been a certain amount of tax avoidance activity over the years in the establishment of that kind of internal superannuation fund where the deductions have been allowable to a company. Of course, moneys have been lent back, certainly to the maximum limit under the old 30-20 rule under present arrangements up to the 100 per cent limit. Alternatively, shares have been acquired in the small business company. The question has always been as to the security of those investments in those circumstances. It is quite obvious that if the company goes bust, it is possible that it will not be able to meet its obligations to the superannuation fund and consequently the employees might well miss out. In those circumstances all honourable senators would deplore any situation that might arise that would create that kind of difficulty. However, it is useful to remind ourselves that the corporate veil is used to establish superannuation funds by many self-employed people, particularly those who are bound by their own codes of ethics and so on-I am thinking of professional people-as a vehicle to provide superannuation to themselves which is not available to other people in the community. As a result we have to take account of the fact that that kind of internal fund management is a legitimate part of business activity and consequently provides some benefit in keeping people off the social welfare system in their retirement by allowing them, during their working lives, to build up assets in superannuation. I take the Government's point that it is necessary to apply principles whereby there is not a lack of security, even to people in the later situation compared with those in the former situation which I mentioned. I think it is also wise to acknowledge that not everybody is in that kind of avoidance mode and it is salutary to remember that not everybody has access to superannuation in the way that others do. Whilst this Bill provides for a maximum 10 per cent loan back to a company or a business by a superannuation fund, it is wise to realise that in due course that may prove to be too low a figure. I hope that the Commissioner of Taxation will be aware of the possibility that businesses sometimes need to invest or obtain capital from those sources at a level a little higher than that in order to keep themselves alive, without jeopardising the whole security of the superannuation fund. Further issues concerning superannuation which are part and parcel of this legislation are very interesting. Firstly, the Government, as announced in the Budget, has abolished the concessional rebate of $2,000. That follows a decision in May, in the mini-Budget, as I recall. It means that a rebate will no longer be available to people who are contributing to superannuation, life assurance, council rates or whatever. Consequently that will not be taken into account in determining the maximum amount of rebate that might otherwise have been allowable against the incomes of taxpayers in that situation. However, a total $1,000 rebate for medical expenses has been introduced as part and parcel of the Government's Medicare arrangements. While we do not necessarily support the Medicare arrangements, there are numerous questions that we would like to ask about that if we had the time. It is interesting to note that the Government has acknowledged the concept of superannuation being allowable as a full tax deduction-as distinct from a rebate, which we have just been speaking of-for self-employed people. In fact, the maximum amount has been raised from $1,200 to $1,500 in this Bill. We on this side of the chamber applaud that. It is something that we have advocated for a long time. We hope that the Government will go further. Certainly, when we are in government, we will go further than that. The Fraser Government in 1980 introduced a tax deduction of $1,200 for self-employed people. It has been a major injustice over many years that self-employed people have not had access to superannuation and have not been able to obtain tax support for superannuation contributions in the way that people who are employed have been able to, except by the devices mentioned earlier of establishing their own superannuation funds. We also note that the Government has increased from $50,000 to $55,000 the level at which lump sum termination payments will become taxable. That is cold comfort to the Opposition because we object violently to the principle of the tax in the first place. It will be abolished upon our return to government. I notice that the Government will now provide a $1,000 deduction towards the cost of election expenses for candidates for local government. That seems to me to be a matter of some justice, having acknowledged the situation over many years. I notice also that the Government intends to raise social security beneficiary rebates and that is to be applauded. However, I hope that one day the Government will turn its mind to the more fundamental questions of how people get into those kinds of poverty traps and do something more certain than it has done, either in the Budget or the recently announced tax package, to change the whole basis upon which poverty traps are assessed at the present time. I note that provisional tax will be raised by a factor of 11 per cent this year over the previous year which indicates that incomes are certainly expected by this Government, notwithstanding the accord, to be somewhat greater. There will be co-operation between Commonwealth and State bodies in the collation of information on avoidance and evasion and I welcome that practice as well. Sitting suspended from 6.30 to 8 p.m. The DEPUTY PRESIDENT —Before I call the next speaker I draw the attention of honourable senators to the presence in the gallery of former Senator George Branson. I welcome him back to the Senate. Honourable senators-Hear, hear! Debate resumed. Senator MAGUIRE(South Australia)(8.00) —Tonight I wish to make some remarks on the Taxation Laws Amendment Bill (No. 2) 1985 and the Medicare Levy Bill 1985. The Taxation Laws Amendment Bill (No. 2) abolishes, from 1 July next, the concessional expenditure rebate for persons paying personal income tax. I think that it is a very appropriate measure. It is high time that that rebate was abolished. I think that it is more appropriate to abolish it rather than just to limit its applicability by imposing a tighter ceiling than we have had so far on expenditures which qualify for that rebate. I think that we have learned a lesson from the measures in 1983 when the present Government lifted the ceiling for expenditures under the concessional expenditure rebate from $1,590 to $2,000 before taxpayers qualified for the rebate. It was certainly a most commendable move but, as far as I was concerned, it had a most disturbing side effect, and that was that the benefits of the concessional expenditure rebate were focused more on the wealthy taxpayers than was the case previously. Before that move was taken the rebate was available to an estimated 10 per cent of all personal income tax taxpayers, but after we tightened up the eligibility for it the rebate was available to only 6 per cent of taxpayers and they were, in fact, the wealthiest taxpayers in the community. The concessional expenditure rebate, in its last existing form, stemmed from the 1977 Budget brought down by the late Sir Phillip Lynch. I think the scheme was most unsatisfactory and inequitable because the rebate was based on expenditures incurred, the ability to spend and, as honourable senators would know, the ability to spend is fairly closely linked with incomes. It can be argued that it was a rebate available mainly to wealthy taxpayers and was, therefore, highly inequitable. This Bill replaces the concessional expenditure rebate with a medical and hospital expenses rebate to the extent that those types of expenditure exceed $1,000 in any financial year. The new rebate commenced from the beginning of the current financial year 1985-86. I think that the changes overall will significantly simplify the personal income tax system. Certainly, they will make the tax system fairer since only a small proportion of taxpayers, mainly those on higher incomes, were eligible for the previous concessional expenditure rebate. In summary, taxpayers were entitled to a rebate of 30c in the dollar for each dollar that their concessional expenditure exceeded $2,000 per annum. Examples of allowable concessional expenditure were: Medical expenses, superannuation and life assurance premiums, up to a maximum of $1,200-so there was actually a second limit of $1,200 in regard to those two items-local government rates, which in turn were limited to $300; and education and self-education expenditures, which were limited to a maximum of $250 per person. In 1983-84, the last financial year for which we have detailed information, only 6 per cent of taxpayers incurred sufficient expenses to benefit from the concessional expenditure rebate. However, it is interesting, from the more detailed information made available by the Australian Commissioner of Taxation, that compared with that 6 per cent for the overall community of taxpayers, 48.3 per cent of taxpayers with taxable incomes above $22,000 claimed the rebate. So the system was highly skewed in favour of persons with relatively high incomes. A taxable income of $22,000 two financial years ago corresponds to a significantly higher gross income in the present financial year. It is clear from an analysis of the Taxation Commissioner's statistics that most of those taxpayers who did benefit from the concessional expenditure rebate were upper income earners. Therefore, it can be argued that the concessional expenditure rebate worked to undermine the intended progressive nature of the taxation system. I would like to place on record tonight some of the figures which have been made available to me in regard to the concessional expenditure rebate in the 1982-83 financial year. In that financial year some 17.1 per cent of all taxpayers received a taxable income of over $22,000 per annum. Yet taxpayers in that category received 66 per cent, or two-thirds, of the total cost to the Budget of the concessional expenditure rebate. In fact, almost $86m in regard to the concessional expenditure rebate went to those 17 per cent of all taxpayers. Conversely, in the same financial year, 1982-83, 59.9 per cent of all taxpayers earned less than $16,000 per annum. Yet that group of taxpayers, 60 per cent of taxpayers, received only 10 per cent of the total cost to the Budget of the concessional expenditure rebate. In other words, 60 per cent of taxpayers received rebates worth $13.8m; whereas 17 per cent of taxpayers received rebates worth $85.8m. So it was highly skewed in favour of the wealthier group of taxpayers in the community. As I have already indicated, that happened because the rebate was related to certain expenditures in defined areas. It was related, therefore, to the ability to spend and that ability to spend was significantly related to income. Effectively, the concessional expenditure rebate was restricting the tax base precisely where it needed broadening; that is, at the top end of the income scale. Most of the items subsidised under the concessional expenditure rebate, such as superannuation, already receive substantial government assistance through other means. There is substantial subsidy to superannuation through various forms in the Commonwealth Budget and, of course, in this legislation which we are debating tonight there is a further subsidy in that superannuation payments made by self-employed taxpayers qualify for a tax deduction of up to $1,500 per annum, which is an increase on the previous figure which was $1,200. Similarly, education expenditure, which was subsidised through the concessional expenditure rebate, also is a major area of expenditure by the Commonwealth Government. It is a direct item of expenditure through the education budget. It is no longer equitable or efficient to provide assistance to a small section of the community by way of a tax rebate such as the concessional expenditure rebate. However, the Government has acknowledged that some assistance is both necessary and desirable for those who incur such items as higher medical expenses which are outside the scope of the Medicare scheme. As honourable senators will know, often those members of the community are elderly or disabled persons. The new medical expenses rebate will apply to the existing range of medical expenses covered by the taxation Act. These include doctors, dentists, optometrists and chemists expenses, hospital fees and so on. The new rebate for unreimbursed medical expenses will apply at the standard rate of taxation, which is currently 30c in the dollar but which is to be reduced to 29c in the dollar from September next year. The new medical rebate is estimated to cost around $20m in a full year. At the same time the abolition of the concessional expenditure rebate will result in a revenue gain to the Budget of about $80m in a full year. The revenue savings from abolition of the concessional expenditure rebate have been directed entirely to cuts in personal income tax and as a result I believe that the taxation system will be fairer, more equitable and more related to the ability to pay. The Taxation Laws Amendment Bill (No. 2) also increases taxation rebates for unemployed, sickness and special beneficiaries in the community. This is a group which has not qualified for taxation rebates until recent years, and as a result of this Bill rebates will be increased from $75 per annum to $220 for married or de facto couples, and from $50 to $170 for single taxpayers. In addition, the income levels above which these rebates shade out will be increased as well. The general intention of this move is to ensure that those persons wholly or mainly dependent on social security benefits will pay no personal income tax in 1985-86. That is the main intention behind the increases, but of course the increased rebates also will help reduce the prevalence of so-called poverty traps in Australia-that is, those persons on social security benefits may earn more private income before their total income is subject to income testing. Poverty traps arise in our system of social welfare payments as a result of the combination of social security income tests and the personal income taxation system. It has been an easy matter in examining social welfare payments and the taxation of them to identify a number of categories of Australians who were paying exceedingly high effective marginal tax rates on social welfare benefits. In fact, a number of persons receiving social welfare benefits in Australia were paying effective marginal tax rates well above the existing 60c in the dollar maximum marginal tax rates for employed members of the community. That situation arose as a result of the combination of the income test for social security benefits and the withdrawal rates for benefits as incomes from personal exertion increased, and also the combination of those with taxation on benefits. Throughout the debate on tax reform the Government has stressed the need to reduce poverty traps. In fact, one of the nine principles of taxation outlined by the Prime Minister (Mr Hawke) last year was to reduce poverty traps. I think that was one of the most important principles he laid down for the debate and subsequent action on tax reform. The Government has mounted a major attack on poverty traps. A number of measures in addition to the increased taxation rebates were announced in the Budget and in the September taxation statement of the Treasurer (Mr Keating). From November next year three such new measures will come into operation. First, the pensioner income test free area will rise from $30 to $40 a week for single taxpayers and from $50 to $70 a week for couples. Secondly, for a pensioner who has children the disregarded income will increase from $6 to $12 a week per child. Thirdly, the strict income test applying separately to rent assistance for pensioners will be abolished. This will remove a poverty trap facing hundreds of thousands of pensioners and beneficiaries who depend on the private rental market for their accommodation. These new measures all together will significantly reduce the extent of poverty traps and will help about one million Australians. One group of about 450,000 pensioners will receive a $5 a week increase in their pensions as well as facing lower marginal tax rates on those pensions. As many as 300,000 welfare recipients who rent privately will receive an extra $15 a week in their rent assistance. Most importantly, these measures will boost the incentive for people to seek part time work since their effective marginal tax rate will be lower. Overseas and local Australian research which has been carried out on work incentives is fairly inconclusive. There is very little evidence that changes in tax rates across the board have a very significant effect on incentives to work. But there is some suggestion from overseas research that, in respect of the lowest income earners in the community, changes in tax rates can have an effect on work incentives. It seems to be specifically that group that is most responsive to changes such as those proposed in this legislation and also in the other legislation which will enable the Government's tax package to be introduced. Encouraging persons on benefits and pensions to take part time work will help ease the transition of persons from being in receipt of welfare to their obtaining full time work. In attacking poverty traps in this way the Government has shown its commitment to direct the benefit of economic growth and tax reform to those Australians most in need. These are progressive measures designed to lessen the taxation burden for those least able to pay. I also wish to address some remarks to the Medicare Levy Bill 1985. I specifically wish to talk about the effects of the changes in levy arrangements for families with different levels of income. The Medicare Levy Bill exempts from payment of the Medicare levy individuals with taxable incomes of $7,526 or less and families and sole parents with family incomes of $12,504 or less. This Bill provides for an increase in the threshold below which persons are exempt from the Medicare levy. It also provides for the abolition of the ceiling on the maximum Medicare levy payment per annum by a taxpayer. In addition to those household or family types I have just referred to, the family or sole parent threshold is to be raised by a further $1,530 for each dependent child or student. For example, a single income family with two children will be exempt from the Medicare levy below a taxable income of $15,564. At present, as I have indicated, there is a ceiling on Medicare levy payments of $750 per annum, which is to be removed by this legislation. From now on all taxpayers will be required to pay one per cent of their annual taxable income as Medicare levy. That means that instead of the levy reaching the maximum figure at a taxable income of $75,000 per annum, it can now be increased for persons above that level. Of course, that is a very progressive taxation measure. It means, for example, that a taxpayer with an income of, say, $100,000 will now pay $1,000 towards the cost of Medicare. The removal of the top ceiling on the Medicare levy will provide a revenue gain to the Budget of $7m in 1985-86 and $12m in a full financial year. The bottom threshold, which I have indicated is being raised in this legislation, will provide, for example, that a single income family with two children and an income below $15,564 will be exempt from paying the levy. That move will cost the Government $10m in the current financial year and $15m in a full financial year. It is particularly interesting that the number of Australians who will benefit from the increase in the Medicare levy threshold is estimated at some 280,000 persons. So, quite clearly, a group of over a quarter of a million people in the community will benefit from the increase in the Medicare threshold. They will no longer be required to pay one per cent of their income to support the Medicare arrangements. Overall, the Taxation Laws Amendment Bill (No. 2), the Income Tax (Individuals) Bill, the Income Tax (Companies, Corporate Unit Trusts and Superannuation Funds) Bill and the Medicare Levy Bill, which we are debating this evening, I believe will help move the Australian taxation system to a system based more on the ability to pay. It will ensure that those with the greatest incomes, those with the greatest wealth, will pay a higher proportion of their income in taxation and that those with a lower ability to pay, a lower income, will be required to pay a lower proportion of their income in taxation. Overall, I believe the Taxation Laws Amendment Bill (No. 2) and the Medicare Levy Bill will help to move the Australian taxation system in a more progressive direction. Senator MICHAEL BAUME(New South Wales)(8.22) —I want to deal with several matters raised in the Taxation Laws Amendment Bill (No. 2), a compendium Bill, the Income Tax (Individuals) Bill and the Income Tax (Companies, Corporate Unit Trusts and Superannuation Funds) Bill, and in particular the Medicare Levy Bill. I will start by dealing with the Medicare Levy Bill. This Bill relates to a real problem that the nation is facing right now. There is no doubt that Medicare is causing us a great deal of problems. Last year the levy paid for roughly half the cost of Medicare and this year it will pay for about a third. As I understand it, this year Medicare will cost about $3.6 billion and the levy will raise about $1.28 billion. So for all but low income earners, the Medicare levy is now a one per cent addition to the income tax rate, particularly now that the earlier suggestions that it was simply a specific levy have been destroyed by the fact that the Government has removed the upper limit so that it is simply an extra one per cent tax. Now when the Government talks about a 49 per cent tax rate under its new arrangements it is, of course, talking about a 50 per cent tax rate for everyone and it would be nice if it were honest enough to say so. The interesting point I was making about the Medicare levy is that it is funding a smaller and smaller proportion of the health care budget because of the rocketing cost of Medicare. It is not that Medicare is providing a better and better service. On the contrary, it is providing a worse and worse service. It is interesting to look at what the Minister for Health (Dr Blewett) said when he introduced Medicare. He said: The introduction of Medicare is the biggest step taken by an Australian government to ensure that every Australian has the best and cheapest medical and hospital care. One can look back at that as if it were some kind of sick joke. The reality is that the Government has not by any means delivered the best, and certainly not the cheapest, medical and hospital care. It is obviously the worst and the most expensive that this nation has seen since the original Medibank. One can have a look around in our society and see, as Mr Porter, the shadow Minister in another place, said when dealing with Medicare quite recently: Medicare and the Medicare levy have forced a large number of people to give up private health insurance and become reliant on the already overloaded public hospital system. Nurses are resigning from public hospitals in droves as a result of the pressure caused by the overwhelming demand on the public hospital system under Medicare. Hospital beds are being closed as a consequence of these staff shortages. The result is growing queues of people waiting for hospital beds. Under Medicare the queues have more than doubled. In Victoria alone the queues have risen from around 8,000 people to around 25,000 people waiting for hospital beds. Doctors and doctors' organisations such as the Australian Medical Association have expressed concern about the deterioration in the standard of service provided in the public hospital system. There is no doubt about that element, the service element. Now let us look at the cost element. Obviously, that has been going up enormously even though the increased revenue that this change in the levy will make will go nowhere near meeting those additional costs. There is no doubt that the Government does have a responsibility to improve this whole Medicare system. Mucking around with the levy at the fringes, as in this Bill, will not make anything like a fundamental improvement. The Government must permit people to opt out of Medicare and choose their health insurance from a genuinely competitive private sector. Medicare's appetite, as was described by Mr Porter, for medical benefits at the expense of the hospital system we simply cannot afford any more. Nor can we afford to allow the private system to atrophy as the public system teeters on the brink of disaster due, of course, to the overwhelming burden of Medicare. This Bill removes the $70,000 ceiling on incomes on which the levy is chargeable and so removes any pretence that this was in fact a levy simply to fund proper requirements for a medical service. It is no more than a tax. I hope that the Government ceases pretending that somehow it should be distinguished from the rest of the tax system because, as I said, it will be going to meet only one third of that cost anyway. It is, in fact, simply an addition to the revenue. It is a simple tax. I think, though, it is worth mentioning that the Medicare levy arrangements at the moment create the most extraordinary anomalies. Some instances were outlined in the other place. People on similar family incomes pay enormously different Medicare levies depending on the composition of their family income. There was one instance, for example, where the family income for two different families was $30,000 but the levy in the first case was $300 and in the second case was $254. We have other instances in which one family which was earning a total of $12,425 paid a levy of $124, which was exactly the same levy as that for another family which was earning $19,500. These anomalies go on. There is no doubt that something should be done by the Government to clean this up. In fact, another example outlined in the other place referred to one family with an income of $28,000 paying $140 as a levy, another with the same family income paying $104 and a third family paying $210. They all had the same family income of $28,000. That enormous range from $104 to $210 for families earning the same income but paying different amounts because of their different composition does strike me as being inequitable. I hope that the Government will do something about it. The Taxation Laws Amendment Bill (No. 2) deals with a most interesting arrangement. It relates to non-leveraged finance leasing and similar arangements. This, of course, involves the Federal Labor Government preventing the New South Wales State Labor Government from organising a tax fiddle relating to the Eraring power station. We certainly have no objection to the Government proceeding in this way, but it is a curious matter that the Federal Labor Government found that it had to do this. The proposal to change the statutory investment rules so that income tax concessions applicable to the income of, and contributions to, employer sponsored superannuation funds will be conditional upon not more than 10 per cent of the fund's assets-that is measured at cost-being invested with the employer or an associate of the employer causes me some problems. A sound case can be made out that one of the greatest incentives for employees to seek to maximise returns and to increase the performance of their company, is if that company's success will benefit them on their retirement. Obviously, if the company does well the company's superannuation fund will benefit. I concede that there may be some point in limiting the amount at which superannuation funds should be at risk. Obviously, if the great bulk of the superannuation fund's assets are put back one way or another by investment, in particular in equities or loans to that company, there is no doubt that the employees are at a degree of risk. I think Waltons in Sydney one way or another had the bulk of its employee superannuation funds in the company. When Waltons' fortunes rose the employees did well; unfortunately, when Waltons' fortunes went the other way, of course there was to a certain extent a lottery in that employees who left the company at that time did not do as well. Nonetheless, I think it is important not to limit to only 10 per cent the opportunity for employees to participate through their superannuation fund in the profits that are available from the company for which they work. I hope that the Government will reconsider this extraordinarily low figure of 10 per cent. I think the General Motors superannuation fund in the United States is the biggest single shareholder in General Motors. I am not aware of whether that shareholding is larger than 10 per cent of the superannuation fund's total funds. All I know is that it is a useful and proper procedure for a company to have its own superannuation fund as a major investor in the company. I hope there is nothing in this legislation which suggests that it is somehow improper for a company's superannuation fund to invest in that company. On the contrary, I think it should be stated with some vigour that it is a useful form of employee participation in the benefits, if any, of a company. The next part of the Bill relates to superannuation arrangements for the self-employed and increases the deduction from $1,200 to $1,500 a year from this year. I mentioned this briefly the other night when pointing out that the then Leader of the Opposition, Mr Hayden, objected to the introduction of this scheme in 1980 when Mr Howard was Treasurer and introduced it. Mr Hayden referred to it as a rort, a rip-off and something that would benefit, I think his polite expression was, the bankrollers of the Liberal Party. As I pointed out last night, it is counterproductive to use that kind of offensive language in any event but it is even more silly when the Party that uses that kind of pejorative language is increasing that concession because it now recognises, once it is in power, the merit that it could not see when in opposition. I should not be surprised, having seen how much this Government has totally reversed its policies across such a large area-for example, foreign banks-that it has changed its position in its entirety and is supporting what it sought to attack in a fairly ridiculous way for cheap political point scoring in 1980. However, one thing that concerns me is that while on the one hand the Government is providing additional assistance on top of the assistance already granted by the coalition when in government to self-employed people, at the same time it is more than removing that benefit by its dreadful capital gains tax. We have a situation where the Government is saying on the one hand: `Yes, we believe it is right that self-employed people should be entitled to prepare for their retirement by having a superannuation scheme'. Yet on the other hand it is destroying the capacity of many such people to sell their small businesses, for example, and retire on the proceeds without being hit with a very severe capital gains tax. I know the Government will say that it is not a severe capital gains tax but for small business it is a severe capital gains tax. I stress that because of the ridiculously anomalous situation that emerges when one looks at the goodwill factor, the factor that Senator Walsh is still unable to understand. I should tell the Senate, very simply, that there is a definition of goodwill, despite what Senator Walsh or anyone else on the Labor benches says. Goodwill is the difference between the sale price of an enterprise and its net tangible assets backing. The difference between the value of the assets and the sale price is goodwill. Among the many things that disturb me about the Government's proposal for a capital gains tax this stands out because of its unfair and unreasonable impact on small business. For example, I looked at the instances on page 47 of the statement by the Treasurer (Mr Keating), the so-called `Reform of the Australian Taxation System'. It intrigues me that change is always translated into reform in Labor Party jargon. Page 47 of the statement outlines an example in which if the proceeds from the disposal of an asset are $22,500 one deducts from that amount the original cost which, in this example, is $10,000, and increases it for inflation between the date of purchase and the date of sale which would amount to 200 per cent. The cost of the asset then increases from $10,000 to $20,000 leaving a net taxable gain of $2,500 on which tax of $1,225 is payable. That looks like a 100 per cent increase; I am overstating the inflation rate. Obviously, I was taking the inflation rate of the year after next, rather than next year's. There is no doubt that inflation will rise under this Government's current policies. I come back to the point in hand. The interesting thing that the Treasurer's statement does not indicate is what would happen if the value of the business went up not because of inflation affecting the value of the assets but only because the people had made a success of that business. In other words, if there is a large gap between the assets and the sale price which results simply from the fact that the business was sold because it had the capacity to make money and the person purchasing it was prepared to pay, that total amount will be fully taxed at the marginal rate. In effect the goodwill element will be totally taxed. Senator Messner —It is a tax on success. Senator MICHAEL BAUME —As my friend Senator Messner says, it is a tax on success. It would seem to me that this tax is doubly anomalous because if in fact the purchaser of that business had bought goodwill in the first place, that goodwill would be indexed because it would be one of the costs of acquisition of the business. So, goodwill that is purchased and then increases is subject to the indexation that the Government says will apply to this matter, but goodwill that was not purchased-in other words, if some people simply started a little business, worked their guts out and paid no goodwill-cannot be indexed upwards because there was no goodwill to start with and, as a result, will be totally taxable at the marginal rate. It is extraordinary that this concept has yet to penetrate the Labor corridors of power. However, I wish that a more equitable arrangement could at least be examined by the Government. At least when we ask questions about this matter we could be given an indication that the Government is aware of the problem and certainly aware of the impact that it will have on people who have set up a business from scratch and have worked their hearts out. Clearly, if the Government is going to index a capital gains tax, of course a benefit should accrue to people who have acquired goodwill. To that extent the purchase of goodwill is properly indexed upwards. However, we have not had any sort of coherent response on the many occasions that we have raised this question of goodwill. I think it is about time that the Government woke up to that fact. It should be prepared to cease acting in an arrogant way about a matter that affects small businesses throughout this nation and particularly, of course, small businesses in country towns which are suffering enough. Senator MacGibbon —They aren't interested in the bush. Senator MICHAEL BAUME —I accept what Senator MacGibbon says. The Government is certainly not interested in the bush. It seems to me, having gone to a rally at Werris Creek, at which, I must say, the locals showed sufficient recognition of reality to solidly boo the Minister for Primary Industry (Mr Kerin), that there is a growing feeling of disillusionment and depression among people in rural areas not simply because of the impact of this Government's policies on farmers but also because of the impact of them on small business people, particularly those in country towns. The next matter I wanted to raise was the wiping out of the $2,000 concessional expenditure rebate and replacing it with a medical expenses rebate. Of course, one will have to pay medical expenses of over $1,000 to merit a rebate at all. It seems to me that the principle of wiping the concessional rebate is a very difficult one. I concede that concessional deductions are of benefit more to those on higher incomes than those on lower incomes. Perhaps it may be appropriate for the Government to replace the concessional expenditure with rebates. However, we are to have a fixed level of rebate which I think is unreasonable and is not responsive to the reality of what people's expenditure patterns really are. The Government, of course, says that only 6 per cent of people benefited from the concessional expenditure rebate, and I concede that. However, I believe that there is a great deal of merit in allowing some items to be treated as deductions one way or another, either by way of concessional deduction or by rebate. I hope that when this Government departs a government that is more responsive to people's real expenditure patterns will correct this situation. The next item to which I wish to refer is a quaint quinella. I refer to the exemption from tax of animal racing clubs and the allowing of deductions for depreciation of livestock. The fact that this has come at the same time as the Government has quarantined rural income probably removes the so-called benefit that many people in the racing industry were cheering about. I have to admit that there is no doubt that before this change was announced New Zealand was receiving an unfair benefit in respect of the racing industry, and that was evident from the extraordinary number of Australian horsebreeders who, in effect, looked to New Zealand as a source of horses to race in Australia. There is no doubt that there had been a run-down in the Australian industry. As we have closer and closer economic ties with New Zealand it seems reasonable that our racing industry should not be put at a disadvantage against the New Zealand industry. However, it is interesting to note that what the Treasurer giveth the Treasurer also taketh away in a different way. The next matter that I want to raise in the few remaining minutes of my time relates to provisional tax and the manner in which this tax is to be raised. The Government this year will increase by 11 per cent its assumption of the increase in the incomes of provisional taxpayers. I must say that I found that curious when I looked at the Budget Papers because I remember that there was a massive overstating of provisional tax last year. I might say that I took a role in warning the Australian people that in fact there had been a major overstatement, and that turned out to be true. That warning was, of course, issued by the then Deputy Leader of the Opposition, the honourable member for Bennelong (Mr Howard), when last year's Budget was being considered. It seems to me that when we are facing a fall in farm incomes this year of something like 22 per cent in real terms it is fairly quaint that the item that made up the previous year's biggest rise-I understand that that was farm incomes-will not rise this year at anything like the same amount, and will in fact fall. This seems to suggest to me that increasing the assumption under which provisional tax will be raised to 11 per cent is, at best, heroic. While it is true that this may well apply to a large proportion of business incomes-the incomes of unincorporated businesses and so on-it seems to me that the negative impact and the worsening performance of the rural sector, where, no doubt, there will be many exemptions and many applications for the 11 per cent rise not to be applied, will damage the prospects of an overall increase of 11 per cent. I wonder whether that figure will be achieved. On the other hand, the rate of inflation is going to be so high in Australia that maybe the Treasury knows more than we do and maybe 11 per cent is an unreasonably low figure in view of the fact that the Government clearly has a vested interest in the levels of inflation to help it overcome some of its budgetary problems. People are more concerned about the manner in which provisional tax is to be gathered than they are about the increase in provisional tax. It sounds reasonable to have quarterly payments of provisional tax. However, can I remind the Senate that one consequence of this is that within the first 12 months of this proposal commencing the ordinary provisional taxpayer will in fact pay, I think, 175 per cent in provisional tax. In other words he will pay 100 per cent of his provisional tax in April. He will then pay 50 per cent in the following December and another 50 per cent at the beginning of March. So within the 12-month period the impact on his cash flow will be fairly severe. Obviously the impact will be severe because the Government has said that this proposal will be of benefit to the Government in the sense of $55m not having to be spent on the interest bill to float Treasury funding-treasury notes and so on. If in fact it is going to save the Government $50m I can assure the Senate that it will be costing the private sector a hell of a lot more. The cost to the private sector of borrowing money or failing to earn money on that cash will be far greater. There is a cash flow burden that will be met. I accept the fact that to an extent the Government is kindly diminishing that impact by not having the first payment until December so that the two are lumped in one; otherwise it would have been much more unreasonable. I finish by returning to the capital gains tax problem, which I think was raised by Senator Messner a little earlier, relating to the acquiring of leased equipment and the tax which would have to be paid when leased equipment was acquired by the hirer at the end of the lease arrangement in order to trade it in on a new item. Capital gains tax would be paid on the difference between the end of lease value and the trade-in price. It seems that what is desperately needed is a simple entitlement to roll-over in the same sort of equipment as Americans do in housing. The tax exemption, if there is a roll-over into similar equipment, would be a very simple way of avoiding an unjust consequence of the capital gains tax in that area. In general the Opposition does not intend to oppose any of these Bills, but we certainly have some complaints about the way the Government has gone about its so-called tax reform. I feel certain that the people of Australia will recognise, as the package proceeds, how unfair and unreasonable it is in so many ways. Senator RICHARDSON(New South Wales)(8.52) —The taxation Bills we are debating tonight cannot be seen in isolation, as merely a single attempt to turn the Australian economy around. The reality is, of course, that they are part of a program upon which the Hawke Government embarked immediately upon assuming office some two-and-a-half years ago. It was not surprising to hear Senator Michael Baume say in conclusion that he and his Party, the Liberal Party of Australia, have some complaints about the way the Hawke Government has gone about tax reform. The Fraser Government, of which he was a member and of which the new Leader of the Opposition, Mr John Howard, was Treasurer, was never able to do anything about tax reform, often because of pressure from the back bench. Perhaps Senator Baume when he was in another place was one of those back benchers. I will give some quotes on the performance of the coalition in those years shortly. The measures we are debating tonight are simply part of the policies pursued by the Government, directed towards a fairer, more equitable society, and a more efficient economy in which we can create strong economic growth. By any measure the Hawke Government's record over those two-and-a-half years can only be seen as an outstanding success. We have recorded growth rates that are the envy of Western nations all over the world. We have 430,000 more people in jobs, which means 430,000 more Australians paying tax rather than being in the dole queues into which they were forced during the Fraser years. Inflation has been cut. We have turned the economy around and we look confidently to the future. But that was all able to be done because this Government has shown itself to be capable of taking the hard decisions that its predecessor avoided on each and every occasion when confronted with this sort of problem. We have taken a number of hard decisions on taxation reform and this should be seen as the culmination of a number of steps already taken. Any steps taken in the cause of tax reform were made necessary because of the unprecedented pressure the taxation system found itself under because of its seven years of neglect during the time of the Fraser Government. We had a crisis in our taxation system. That crisis was brought about by the phenomenal growth of tax evasion and avoidance, with the tax minimisation schemes. We have seen a graphic example of what happened in that area in the last two days with the gaoling of two of the most spectacular promoters of those schemes about which those opposite could do nothing in seven years. When one looks at their record on tax avoidance, is it any wonder? Not only were Opposition back benchers putting pressure on Mr Howard to do nothing, but also when anyone tried to take action files could not be found. They were lost deep in the bowels of the Attorney-General's Department somewhere in Western Australia, next to the files containing the numbers of certain ladies of the night. The system, after all those years of neglect and misery, needed reform; it was no longer equitable, it was no longer efficient or simple. It just did not work any more. Taxation became voluntary for those in the higher income brackets. The latest estimates suggest that only 10 per cent of those in the 60c bracket who ought to be paying tax are now doing so. That is one of the main reasons why that bracket has come down pretty well to the company tax rate. Senator Michael Baume —Who estimated that? Senator RICHARDSON —They are Treasury estimates. They came out towards the end of last year or early this year. I note that the Treasurer (Mr Keating) has used them in the House a number of times without being challenged by anyone sitting opposite him. Thousands of Australians were failing to pay their taxes and their just share of the tax burden. The prescribed payments system, which was one of the earliest steps that we took, was a classic example of demonstrating just how when some action is taken we can get those who are rorting the system, those who, if they are not using tax shelters, simply refuse to acknowledge that they exist at all. We can get at them if we decide to do something. Those Australians who could not and did not rearrange their affairs during those seven years had to pay more and more. If one looks at why the Bills are here tonight, it is because of the growth of that tax avoidance and the effect it had on the taxation system. The distortions created meant that the burden was placed upon those who could least afford it. That meant that ordinary decent Australians in the work place, those who could least afford it, those who had to pay their tax every week, pay as you earn taxpayers, were as usual the ones who were hit. Let us look at some of the things that the Liberal and National parties did in government on the question of tax. One cannot just say that tax avoidance began to bloom or blossom under the Fraser Government; it took off like a rocket. It was the only thing the Fraser Government could get going. In June 1975 one could identify for the previous year 25,000 cases of tax evasion. The amount under dispute was $40.9m. By 1982 it had jumped to 49,000 cases and we were looking at $192m. Then we started looking at all the schemes, not just the small minimisation schemes but the big bottom of the harbour rorts and others. Eric Risstrom, who needs no introduction, said that during those seven years alone up to $7 billion was lost and that is why this Government has to take some action. It is not good enough for Senator Michael Baume to say that the Liberal Party has some complaints about the fact that the Hawke Government has taken action, because the action was obviously necessary. In 1978 Bruce Pascoe, President of the Taxation Institute of Australia, said: During the past year or two tax avoidance became big business in Australia. It became a disease, which, being allowed to go unchecked, reached epidemic proportions. That is what we have had to face. Professor Russell Mathews said that tax avoidance had operated on such a scale as to make personal income tax a voluntary tax for the rich, non-salary earner. The Costigan Royal Commission on the Activities of the Federated Ship Painters and Dockers Union-an inquiry that was begun by the Fraser Government to embarrass the Labor Party-finished up saying, in its 1982 interim report: The tax avoidance industry . . . has developed in Australia, particularly over the last five years, at a rate far in excess of any other industry and has brought with it profits comparable only to the heady days of the Victorian gold rush. That is the legacy that this Government inherited. Concerning bottom of the harbour schemes, as I said, we have seen in the last couple of days two of the biggest promoters of those schemes go to gaol. Six thousand companies-that is the estimate of the Australian Taxation Office-were involved in those schemes. Their schemes were able to earn promoters alone $150m and the amount of tax evaded, at the very minimum, is $2.5 billion to $3 billion, according to the Taxation Office. The largest fraud case ever brought in the bUnited States for evasion of tax was for a sum of $48m. We have two cases running in Australia, which has a twentieth or a thirtieth the population of the United States, in which over $200m is being chased. The former Commissioner of Taxation, Mr O'Reilly, stated publicly that he had continually implored the Fraser Government to act. In contrast to seven Fraser years, as soon as the Hawke Government came to office, it began to take action. We served notice in the election campaign and in the years before to the tax avoidance industry that it ought to look out, that the days of wine and roses, of milk and honey, were over, that a government was coming to power that would do something to stop the rort. That is precisely what we have done. Those opposite should just ask Brian Maher. He will give them the answer. The new Commissioner of Taxation, Mr Boucher, said in his 1983-84 report, when referring to that period: At that time the boom in the promotion of tax avoidance and evasion schemes of the kind experienced in the late 70s and the early 80s was a thing of the past. It took this Government one year to end it all. For seven years the previous Government could end nothing and only allowed for the beginning of a new and an ever-increasing number of schemes. We introduced legislation to reduce tax evasion associated with the cash economy. We were not assisted in that task by those opposite. It is instructive to look back at what happened with the prescribed payments system, because we insisted in that industry on a system whereby it became harder and harder either to pay for goods and services in cash or to be paid for them in cash. What happened? Between 1 September 1983 and 29 June 1984, 56,000 Australians were suddenly discovered. They came out from the woodwork or from holidays in New Zealand or wherever. It was discovered that they existed, that they were entities, that they ought to have been paying tax and had not been paying tax. Why had the previous Government taken no action against the cash economy in all that time? It is also notorious that time and again the Labor Party has attempted to recoup taxation which should have been paid on capital profits, and it has been blocked in its endeavours. This matter was introduced several times and defeated in the Senate. The Liberal-National record on these matters not only should be explained in terms of what I said about tax avoidance, but also should be looked at in terms of the effect that avoidance had in distorting the system and forcing the burden onto ordinary wage and salary earners. Despite the Fraser Government's promise to index personal income tax, it could not get around to doing so. Full indexation was never applied, and even the pretence of partial indexation was abandoned after 1980-81. The taxation burden on wage and salary earners continued to grow. In 1975-76, pay as you earn taxpayers contributed 41.7 per cent of total tax revenue and 76.1 per cent of total individual tax revenue. By 1982-83, the percentages had grown to 46.1 and 82 respectively. Once again, we saw the Liberal Party looking after its base of wealth and privilege. The comparative burden for non pay as you earn taxpayers and corporations declined. In 1975-76, in parallel with that increase in the pay as you earn taxpayers burden, non pay as you earn taxpayers contributed 23.9 per cent of total individual taxation. By 1982-83, that figure was down to 18 per cent. If those opposite had stayed in government, that figure would be down even further and once again wage and salary earners would be bearing the burden. I will cite a couple more figures to illustrate the point. Between 1975-76 and 1982-83 the average weekly earnings grew by 113 per cent. However, during that period, the increase in taxation paid by a single taxpayer on average weekly earnings was 122 per cent. For a taxpayer with a dependent spouse and two children, the increase was 150 per cent. So much for Liberal concerns for the family. Again, let us contrast it with the Hawke Government's response-a response tempered by the need for equity and the need to do something for the poor. The Hawke Government acted immediately to restore equity. In the last Howard Budget-honourable senators should remember him-in 1982-83 compared with the second Keating Budget of 1984-85, pay as you earn taxation as a proportion of total taxation paid reduced from 46 per cent to 42.7 per cent, and as a proportion of total individual taxation from 82 per cent to 73.6 per cent. Once again, this Government got on with the job. Let us contrast the Government's announcement of the last few days of getting on with tax reform with what happened under the previous Government. An editorial of 13 March 1981 in the Australian Financial Review-part of the Fairfax stable and not well known as a socialist rag-referred to a statement on taxation by Mr Howard. It said: The statement by the Federal Treasurer, Mr John Howard, on the Government's taxation policy was as bland as it was predictable. The same old arguments were trotted out-taxation reform is desirable but it will not be done and reached the predictable conclusion that the Government can do nothing about the problem. That went on for seven long years. Again, the Australian of 25 September 1980 stated; Figures used by the Treasurer, Mr Howard, to claim a rise in the standard of living under the present Government have been criticised by the independent Federal Parliamentary Library Research Service. Another article from the Australian of 15 November 1979 was headed `Howard retreats over family trusts'. It is instructive to look at this matter particularly in view of Senator Michael Baume's earlier remarks. An article by Des Keegan-who has spent most of his life criticising the Labor Party but had a rare moment this time and criticised our opponents-in the Australian of 15 November 1979 stated: The Federal Government has weakened its proposed crackdown on family trust income-a move which will cost it $55 million a year-following strong pressure by coalition backbenchers. The decision amounted to a win particularly for the National Country Party whose members have bitterly opposed the taxing of trusts- why would they not?- and a group of Liberal backbenchers, including the former Prime Minister, Sir William McMahon, who have opposed the `inequities' in the policy. A number of Liberal backbenchers have argued the proposition would endanger the Liberal Party in its own seats because the people affected by the clampdown were likely to be coalition supporters. That last sentence sums up why in seven years the Liberals could do nothing. The reality was that their base was in the rorts. Senator Walters —I take a point of order, Mr Deputy President. Following Mr Fraser's crackdown on tax evasion, the present Labor Minister, Mr Dawkins, said that tax evasion was a thing of the past. So I really believe that the honourable senator ought to abide by his Minister's statements. The DEPUTY PRESIDENT —Order! That is not a point of order. Senator RICHARDSON —Regarding the tax reform measures before us today- Senator Peter Baume —A Daniel come to judgment. Senator RICHARDSON —The Government will come to judgment in late 1987 or early 1988 and will romp back to the treasury bench. We have no doubts about that. It is because of measures such as these being enacted that that will happen. I will return to the Bills rather than be bothered by tiresome interjections. These measures announced tonight, or partly announced tonight in this debate are, of course, designed to be revenue neutral. They will not be a grab-bag of new taxes whereby the Government can take more money. They are simply an attempt to make sure that whatever we get we can give back to people in the form of social security. But we have to look at some of the reasons why the Government has to act, quite apart from the mere rhetoric of attacking the Liberal Party's maladministration over all of that period. Almost half the work force now is paying 46c in the dollar or more in personal taxation, and a million more people will be added to that list during this term of the Hawke Government-a million more. If we do not act finally to do something about those rates we will really finish up with a problem. In 1956-57-going back to the years when I was a mere babe-one had to earn eight times average weekly earnings- Senator Ryan —You are just a boy now. Senator RICHARDSON —I agree. At the tender age of 36 there is still something to learn. One had to earn eight times average weekly earnings before one got into the top tax bracket. Today the figure is 1 3/4 times average weekly earnings and going down. The top bracket, which may once have been the province of managing directors, Prime Ministers and procedural specialists, has now been opened up to too many people, even back benchers like me. Ten years ago pay as you earn taxpayers contributed 44 per cent of total government revenue. The figure is now up to 54 per cent. Ten years ago they accounted for 77 per cent of all income from taxation. That figure is up to 83 per cent and it is going higher. That is why these measures are necessary. If we kid ourselves that we still have a progressive tax system, we are not doing the nation a service. We can no longer avoid the need for change. The system was breaking down. Paul Keating and the Hawke Government are finally trying to do something about it. I mentioned earlier that the 60c bracket had become entirely optional for those who could afford to get into the rorts, to pay the Brian Mahers and their cohorts and colleagues enough to make sure that they did not have to do what ordinary Australians had to do. After seven years with nothing being done we did something, and finally we are now starting to see the fruits of all of that labour. Last year alone 400,000 Australians with modest incomes moved into the 46c bracket-400,000 in one year. We cannot sit back and let such things happen. It will always be easy to oppose any change, especially a change as broad and as bold as this one. But if we allow ourselves, as did those opposite for all those years, to be talked into the view that it is just too hard, that people will complain, we will finish up doing nothing. This Government is not prepared to see itself regarded as a government that was afraid to act. This Government has the courage of its convictions and it also has its policies. Let us look at just what is happening with these new tax changes. There is finally a capital gains tax-something that obviously causes some political pain for a government that introduces it. But the reality is that we have to do something in Australia to ensure that we get some more productive investment. We cannot have all of the money going into Gold Coast home units. We cannot have all of the money racing around Australia for the quick profit, the fast buck. What we are about is trying to make sure that investment in Australia is redirected into enterprises that can create employment, enterprises that can secure a future for all of our children, not merely for the children of those who happen to possess the big bucks now. In the area of fringe benefits, we have a real attack on the shelters that have built up year after year, particularly during those notorious seven years to which I have referred. Again, it is not easy to go ahead with a package that attacks fringe benefits because, although fringe benefits may have started at the top of the scale, they have extended down the scale over the years. There will be difficulties with the trade unions, with the ordinary workers, over fringe benefits. We cannot kid ourselves that fringe benefits these days are only for the rich. Senator Walters —Why didn't you tax the workers and not the employers? Senator RICHARDSON —I note that yesterday my Leader used the word `banal'. I have never been convinced that his pronunciation is the correct one. I will still opt for the pronunciation ba'nal and that is the only adjective that I can come up with to describe the interjection. We are also moving towards finally doing something about an identity card, hopefully again, to stop some of the rorts. I cannot understand why the Liberal Party Opposition, which claimed when it was in government that it was against rorts in respect of unemployment benefits in particular, could never act on these. If we are to get a fairer society, we have to move to stop the rort merchants. One of the most obvious and easiest ways to do it is to ensure that a person coming up for a job in a club on a Saturday night is employed under his own name and that a person applying for social security benefits is doing so under his own name. In the end there is really only one way in which we can do it, and the Australia Card provides us with the answer. I do not regard it as particularly innovative in that sense; the need for it has been obvious for a long time. But it took the Hawke Government coming to power to see any moves made in that direction. Senator Peter Baume —How about civil liberties in that area? Senator RICHARDSON —Speaking of the pot calling the kettle black, when the day comes that a Liberal-National party opposition can lecture the Australian Labor Party about civil liberties I will let honourable senators know but I will be old-I was going to say `old and grey' but I had better not say that-before we ever get to that stage. I now turn to the quarantining of farm losses, something that has had some criticism, again from the real constituency of those opposite, over the last few days. Again, the reality is that if we do not face up to stopping that sort of rort we will face up to nothing. This Government looked at the matter for a long time, knowing that inevitably there would be some criticism and that Qantas pilots and whoever else would be in Canberra complaining. But in the end we have to work out whether we are running a government for them alone or for the rest of Australia, for most Australians. I am proud to say that the Hawke Government took the decision that we would have expected it to; it took the decisions to do something to make the system fairer and to stop yet another rort. Insofar as the film industry is concerned, it has been blatantly obvious for years that a massive tax rort has developed in the financing of Australian films, and something finally had to be done about it. Again, that is not something that simply happened last week or last month but something that has been happening over a long period. Whilst Senator Walters smiles, she smiled for those seven years while nothing happened. Senator Walters —I hadn't said anything that time. Senator RICHARDSON —There is a first for everything. If I can achieve for the Senate keeping Senator Walters silent I will really have done a public service; I will have earned my money. The Government is looking, as I said earlier, at a tax reform exercise, not at a tax raising exercise. Every single dollar raised by these measures will be returned to taxpayers. It will be returned to taxpayers in the form of social security benefits, by reform of the income tax scales and the company tax regime-we know about the full imputation of dividends-and by our attack on poverty traps. I spoke yesterday about that attack on poverty traps, but it is worth mentioning in the few minutes available to me what the Government has done in that respect. By making sure that for single pensioners the amount of income allowed to be earned before there is a reduction in pension has been increased from $30 to $40 for couples from $50 to $70, we are making sure that pensioners get some more relief. By increasing the weekly income a pensioner can earn without the reduction of pension to $6 for each child, we have done the same thing. The Government made sure that 350,000 pensioners got an immediate benefit of $15 and up to 700,000 pensioners will be getting a benefit of a minimum of $5. So the Government was aware that these poverty traps were affecting those who could least afford it and it has taken some action. I turn to the reactions to the tax package of some of the leading commentators in the newpapers around Australia to see what some independent observers have said about the things which we are debating tonight. The editorial in the Sydney Morning Herald of 20 September 1985 headed `Tax: the cart arrives' gives us some insight into why honourable senators opposite whinge and whine about the tax package. It states: Of course business and high income-earners will scream about the tax on fringe benefits. . . . . They will also get the benefits of a major reform to company tax which will effectively make dividends tax free in the hands of shareholders. . . . . On balance, business has done well . . . Its claim that the tax on fringe benefits is a ruinous tax on employment is quite hypocritical. It knows that the use of fringe benefits is a major and rapidly growing means of tax evasion. Honourable senators could not say that I am quoting sources that normally favour the Labor Party. The editorial in the Canberra Times on Friday, 20 September 1985 stated: The Hawke Government, in the long-awaited taxation reform package announced yesterday, has made bold and substantial changes to the Australian taxation system. The editorial in the Age of 20 September 1985-it was a big day for editorials-in speaking of the far-reaching reform of the Australian tax system, stated: It is, for the most part, rational, brave and necessary. They are the sorts of comments that one would not expect to read in the Age or the Herald. But they are the sorts of comments that the Government received. It received them because it had the courage of its convictions and the courage to act; the courage which was singularly lacking in the Government in which John Howard was Treasurer, but the courage which will always be found in any government led by Bob Hawke, with Paul Keating as Treasurer. Senator SIDDONS(Victoria)(9.22) —I guess that the one unforgivable sin at this hour of the evening is to be boring. It is difficult, though, because one wonders what has happened to the great tax reform that we have heard so much about. We were to have basic tax reform in this country. Without a doubt, we have had some tax reform. But the great initiatives, I am afraid, have fallen between the cracks. We are not debating those great reforms tonight. We started off with the proposal for a broad-based consumption tax. That has disappeared. We were then told at the National Taxation Summit that we were to have a broad based wholesale tax. The wholesale tax legislation that will shortly be before us contains virtually no reform of wholesale tax. We hoped that something substantial would be done in regard to marginal rates of tax. I will talk about that point in greater detail shortly. But the fact is that virtually nothing has been done about marginal rates of tax this year. We will have to wait until next year or the year after to see the reforms, such as they are. It is very difficult not to be boring at this late hour of the evening in discussing the legislation that is before us. It is essentially uncontroversial. But one or two points, I believe, are worthy of comment. I propose to comment on these areas so that the Australian Democrat's position is made abundantly clear. We will support the legislation by and large, although we propose to move one amendment. The first comment that one could make concerns the abolition of the concessional expenditure rebate. This is a good thing. Concessional rebates have been available on a broad area of expenditure. I refer to education, health, superannuation and so forth. But essentially they were gifts to the wealthy and did not really help the bulk of Australians very much. They were of some value to those with high marginal tax rates and those who spent a great deal of money on health and school fees. In fact, only about 6 per cent of taxpayers are now gaining any benefit from the concessional expenditure rebates. There was reform in this area by the Fraser Government in the late 1970s, when the minimum threshold for the rebates was raised to $2,000. This was a trade-off at the time for tax indexation. Tax indexation did not last long under the Fraser Government. Unfortunately, it has not been promised under the Labor Government. We will not have fundamental tax reform until we have full indexation each year. One matter in the rebate area that could be commented on is the new medical expenditure rebate. This has been introduced to compensate the chronically ill for the removal of the concessional expenditure rebate. As I said, we are in favour of the removal of these concessional expenditure rebates. The Government has introduced a rebate at the rate of 30 per cent. As this is about the average rate of tax paid by most people, the rebate will be more advantageous to those on middle to low incomes than to those on high incomes. However, one must spend $1,000 a year before this rebate becomes effective. We believe this figure is far too high. In particular, it will disadvantage those on very low incomes. We suggest that a reasonable base figure for the rebate is about $500. I will move an amendment to that effect in the Committee stage. One aspect of the tax package for which we applaud the Government is that it has agreed to allow the election expenses of local councillors and members of the Australian Capital Territory House of Assembly as a tax rebate. In a democratic society the opportunity to run for office must be available to all. The provision of this rebate will mean that people who do not have very much money will be able to run for office, in particular at local council level. We can expect this reform to mean that people who are genuinely concerned about local government will run as independents and will not need to be financed by large and influential political parties. The tax rebate changes for pensioners are also very welcome. The effect of this change is to raise the tax-free threshold to $5,275 for single people. That will give a rebate of $220. The threshold for married people is to be raised to $8,795. This move is to be commended because it means that poverty traps have been addressed to some degree. Senator Peter Baume —Surely they have only lifted the level. The traps are still there. They are just at a different level. Senator SIDDONS —Indeed they are, Senator. I was about to make that point. It is quite complex, but at least I will try to give accurate figures. The tax rebate now shades out above that threshold at the rate of 12.5c. One must remember that these people are also paying an initial marginal rate of tax of 25 per cent. In addition, their pension is to be reduced at the rate of 50c in the dollar as soon as they earn more than $30 a week. Each of these provisions on their own is reasonable, but added together we have the 12.5 per cent plus the 25 per cent plus the 50 per cent, which equals 87.5 per cent-one of the highest marginal tax rates that one could imagine and certainly above anybody else in this country. This is what is known as a poverty trap. It is a great disincentive for pensioners to join the work force, even on a part time basis. The fundamental solution to these poverty traps is to index the marginal rates. I now turn to the Income Tax (Individuals) Bill 1985. It formally imposes the income tax rates. As I said earlier, the rates for this year are the same as those for last year. There has been no reform of the marginal rates at all in this tax package. The new rates that we have heard so much about are to apply next year and the year after. That is three years hence at this point in time. Fringe benefits and other revenue raising initiatives are taking effect immediately and are increasing government revenue, but the unfortunate thing is that the Government is not concurrently giving us tax relief. I want to comment just briefly on what we believe should have been the great thrust of the tax reform which has been, as I said, avoided because the Government picked up its bat and ball and went home. The Government was not prepared to introduce a broad-based income tax. It was not prepared to introduce a broad-based wholesale tax, as it promised to do at the National Taxation Summit. It was not prepared to introduce a services tax, as it promised at the summit. The Democrats believe that there must be substantial reform to marginal rates if we are not going to stifle incentive in this country. I am not talking about the wealthy; I am talking about the tradesman, the typist, the school teacher and the single mother supporting her children. I am talking about the so-called middle class of Australia the backbone of this country. A toolmaker-and remember that the marginal rates have not been changed for this year-who earns about $17,500 a year pays a marginal rate of 30 per cent. He works a little overtime, earns another $2,000 a year and suddenly his marginal rate becomes 46 per cent. Suddenly he is being taxed at a marginal rate which was designed to catch the millionaire 20 years ago. What is true of the toolmaker is true of the school teacher, the secretary and millions of other middle class Australians. We consider that reform of the marginal tax rates is absolutely vital if incentive is to be restored in this country. This is the very area of tax reform that has not been addressed immediately. It is being addressed in a very partial way in two and three years time. The Democrats have mentioned on other occasions, and I mention it again now, an alternative to the current rates of marginal tax that we would very much like to see introduced. It would not be very expensive to government revenue if above a certain level, say about $10,000 a year income, the marginal rates of tax were to be increased in a straight line; that is to say, for every additional $1,000 of income earned, the marginal rate should be increased by one per cent up to a maximum of, say, a 50 per cent rate. This would give a straight line increase in the marginal rate. There would be no bumps in it and it would have the effect of immediately restoring incentive to all Australians. It is an option which we suggest the Government look at carefully and which it could implement if it were prepared to face up to some mild form of broad-based consumption tax. We Democrats made our position quite clear during the tax summit. We would have supported the Government on a broad-based consumption tax, although not at a rate of 12 1/2 per cent and certainly not a broad-based consumption tax on the necessities of life. However, with these two provisos we were open to any proposition the Government wished to consider, whether it be a value added tax, a retail tax or, as the Government finally indicated, a broad-based wholesale tax combined with a services tax. None of those approaches have been introduced by the Government. We believe that the Government went to water on that proposition far too easily and that it did not take sufficient account of the crying need to reform the marginal rates of tax for middle class Australians. In fact, Australians have a whole continent to develop and the people of our country are burdened with about the highest rate of marginal tax in the world. They are prohibitive rates. There is nothing more designed to cause discontent and to stifle incentive than to say to people: `No matter how hard you work, you are not going to be allowed to earn above a certain level of income'. In effect, that is what is happening with our high rates of marginal tax. In summary, on one or two occasions we have applauded the Government for some of the initiatives it has introduced. We certainly applaud the way it has introduced the capital gains tax. It may not be particularly relevant to this legislation but it is a part of the tax reform package. We are pleased that the Government has taken note of many of the things that the Democrats said in relation to a capital gains tax and to that degree we compliment the Government. It has moved very well in these areas and has brought in a capital gains tax which we believe is mild and which will not impact unfairly on the economy at large. Unfortunately, the Government has not faced up, yet anyway, to the need for reform of marginal tax rates. It has not faced up to the need to reform and to create incentive again in Australia. That is very much to be regretted. This legislation is essentially uncontroversial. I do not intend to speak at length on it. I have raised the points which I think are worthy of comment and which are of concern to the Democrats. We support the legislation with the exception of the amendment which will be moved at the Committee stage. Senator ROBERTSON(Northern Territory)(9.39) —I enter the debate to consider the implications of the tax package for the Northern Territory. I make no apology for this. I have not done so on previous occasions. I have often said in this place that senators representing the Northern Territory, perhaps with the exception of those who accept high office and don the mantle of that position, are closest to the original concept of what senators ought to be. They are able to speak up for the Territory in this place-something that perhaps some of the senators from the States are not able to do. I am going to avoid, if I can, any repetition of what has been already covered, particularly so eloquently by my colleagues Senator Richardson and Senator Maguire. However, before I start I will just make a couple of comments because these comments, being general, relate to the Northern Territory. I think it is fair to say that the tax package has been well received at all levels. There has been some criticism but it is fairly reasonable to say that it has been generally received around Australia. The anti-Labor media in the Northern Territory attempted to denigrate it, as the media always do. They could not find anything to hang any reasonable argument on. They found very little to criticise. As is so often the practice of the media, they resorted to scare tactics. This practice is employed by a number of people, the media and others, when there are no facts to substantiate what they intend to try to push. There are a couple of honourable senators sitting on the other side of this chamber who are well known for using this technique around Australia. I will refrain from mentioning who they are. Senator Peter Baume —I am sorry; there are only two senators sitting on this side at the moment. Senator ROBERTSON —The honourable senator to whom I am referring is not in the chamber at the moment, but the honourable senator who has just interjected is not unknown for this practice-in a very subtle way, of course. The tax measures which are in front of us are the outcome of an extensive process of consultation. It is strange that the present Leader of the Opposition (Mr Howard) seems to disagree with this process of consultation, this attempt to reach consensus. In a television interview regarding the summit, he said that the Government should decide what it wants to do and push it through. Fortunately, this is not the approach favoured by the present Government. It believes that wherever possible consensus should be reached, but certainly at all times there should be consultation. As we all know, the tax summit did not reach consensus. That is unfortunate, but perhaps it is understandable. It is quite clear that a number of competing interest groups would not even consider compromise. Therefore, there could be no consensus. However, the whole exercise was well and truly worth while and the Government is to be commended for attempting to get this consensus. There is general agreement-there had been before the tax summit-that the tax system is in a crisis. Previous governments have walked away from this. They have put the problem into the too hard basket. I think that this was elaborated quite clearly by my colleague Senator Richardson. I think it is fair to say and to claim that the Australian Labor Party had courage to tackle the problem and it must be commended for it. One observer speaking of the summit had this to say: Speaker after speaker at summit congratulated Prime Minister and Treasurer for having the courage to hold the summit-unfortunately at times it seemed that this was the only thing that many speakers could agree on. What is this crisis? What does it involve? It involves three major issues-avoidance, evasion and minimisation at all levels but, quite obviously, mainly at the higher levels. The package does not go as far as many of us would wish it to go, but for all that it is still the most far reaching in living memory. The fundamental aims of the Government's tax reforms have been outlined. Perhaps I can itemise them. The aims are, firstly, to reduce marginal rates significantly; secondly, to curtail tax avoidance and evasion; thirdly, to restore fairness to the tax system; and, fourthly, to gear the whole system to economic growth by doing three things-firstly, providing greater rewards for initiatives; secondly, removing distortion of shelters, and, thirdly, ending the double taxation of dividends. I wish to look briefly at the main elements of reform. These will apply to all Australians, including Territorians. Then I would like to look at a number of specific cases which are of special relevance to the Northern Territory. Firstly, let us look at the top marginal tax rate, the one that has been mentioned by the last three speakers. It is quite clear that people who should have paid 60c in the dollar under the system did not do so and they used every trick in the book to try to avoid it. Quite clearly, they tried to get away without paying that rate to which their salary or their income relegated them. What was more disturbing perhaps was the fact that it became socially acceptable to avoid and evade tax. One observer commenting on this said: Australians often seem to admire people who can get away with cheating the government without realising it is the community and honest taxpayers who suffer from tax evasion. This is one of the most difficult concepts to sell to the man in the street. If one spoke to a man in the street about someone who had managed to avoid paying tax or who had engaged in tax evasion he would say: `He's a smart cookie. He has good business techniques. He is able to get away with it'. Then one says: `But it is your money that he is fiddling with. If he were paying more you would not have to pay so much'. People find that very difficult to understand. The whole concept is very difficult to sell. There is no doubt that over recent years the whole system has become distorted. As was pointed out by Senator Maguire and Senator Richadson, what we have come to call the tall poppies-those people on higher incomes-have been joined by the mass of the ordinary middle income earners and that is where the problem lies. There is no doubt that people have come to resent paying more than half their income in tax and so they have tried to avoid it. In avoiding it they have tried to avoid paying any tax at all. We have situations where people on many thousands of dollars, even hundreds of thousands of dollars, a year have paid virtually no tax at all because they have been able to recruit clever accountants and clever lawyers to do something for them. Other speakers have dealt with this. Perhaps I can recap the main item in the reform of tax rates. The Government is to reduce the rate of tax in the top bracket from 60c in the dollar to 49c in the dollar. The intermediate rate of personal income tax will be reduced from 46c in the dollar to 40c. It is claimed that these reductions in the tax rate will enhance our economic performance by better rewarding initiative. With these reforms, no Australian will be required to pay more than half his or her income in taxation. The other details have been outlined in much more detail than I intend to go into. Let me move now to one or two specific comments I want to make about the Northern Territory. Firstly, I wish to deal with Northern Territory air fares. I refer to the taxation to be imposed on recreation air fares. I think all of us in this place know the situation that operates. We all know what the statement of the Treasurer (Mr Keating) had to say about recreation air fares. Let me say categorically that I am opposed to this. I have expressed my opposition within the party room and I will continue to do so in the same place. It is interesting that I am supported in this by the National Secretary of the Administrative and Clerical Officers Association-not the Northern Territory Secretary, but the National Secretary. In other words, it is seen as a matter of principle. The Northern Territory News of 10 October 1985 states: Mr Paul Munro has thrown his weight behind the campaign to save Territory public service holiday air fares. Mr Munro has sent a letter to Federal Treasurer, Mr Paul Keating, calling for recreation leave air fares to be exempted from the proposed tax on fringe benefits. His letter argues that the air fares should not be classified as fringe benefits. He said limiting or doing away with the air fares would have a gravely detrimental effect on family situations. Mr Munro also claimed not only did the Territory have an ``extraordinarily high'' cost of living but it was still a remote locality despite technological advances. I wish to elaborate a little on what Mr Munro has said. The facts are, quite clearly, that it is not a perk; it is a condition of employment. It is a condition of employment that many people went to the Northern Territory fully believing they would receive. As such it was a sort of contract. When people were recruited down south they were told: `This is one of the conditions of your service in the Northern Territory. You know that it was introduced, firstly, to overcome the disability of remoteness from families and, secondly, as compensation for the physical environment'. Senator Peter Baume —Would you like us to divide on this matter to test the vote? Senator ROBERTSON —If we come to that I have no doubt that we can come to some sort of an arrangement. Let me look, firstly, at remoteness. People in the Territory are isolated from many families. Air travel is the most appropriate method of travel. When I talk about being isolated from families I mean being isolated from parents and grandparents. The residents of the Northern Territory make more trips per head of population than those who reside in any other major centre in Australia. I seek leave to incorporate in Hansard a table which demonstrates this. Leave granted. The table read as follows- PER CENT OF TRIPS MADE TO EACH DESTINATION BY EACH MODE Destination Aircraft Bus/ train Car Other Darwin... 51.4 6.8 36.1 5.7 Alice Springs/Cent. Aust.... 25.7 16.1 39.7 (a)18.5 Cairns/Green Isl.... 20.8 8.1 64.3 6.8 Hobart... 20.7 5.6 70.1 3.6 Sydney... 17.6 11.2 66.4 4.8 Snowy Mountains... 17.5 17.8 63.8 0.9 Townsville/Magnetic Isl.... 16.6 3.3 76.4 3.7 Mount Isa... 16.4 1.4 64.5 17.7 Mackay/Brampton... 16.2 3.6 75.3 4.9 Adelaide... 15.5 8.2 71.7 4.6 Brisbane... 14.1 6.8 71.9 7.2 Rockhampton/Yepn/Keppel... 12.2 5.5 78.6 3.7 Perth... 11.7 4.9 77.9 5.5 ACT... 11.1 5.0 77.9 6.0 Melbourne... 8.7 4.8 80.0 5.6 Launceston... 8.6 3.5 86.7 1.2 Gold Coast... 8.5 2.9 86.1 2.5 Maryborough... 6.2 3.9 84.4 5.5 All Destinations... 6.2 5.0 83.8 5.0 Notes: (a) Travel by truck accounted for 16.2%. Source: Bureau of Transport Economics, National Travel Survey. Senator ROBERTSON —I thank the Senate. The table shows that of the trips made to each destination by each mode-aircraft, bus-train, car and other-51.4 per cent of people from Darwin travelled by aircraft. In Alice Springs-central Australia-25.7 per cent of people travelled by aircraft. A total of 14.1 per cent of people from Brisbane-I am sure that some will agree that that is another comparatively isolated area-travelled by aircraft. In Perth, on the other side of Australia, the figure was 11.7 per cent, and in Launceston-and Senator Walters is not here to hear this-8.6 per cent. So quite clearly people in the Northern Territory tend to travel more by aircraft. Let us look at the effect of remoteness. The Territory has the youngest population in Australia, and I seek leave to incorporate in Hansard table B which demonstrates this. Leave granted. The table read as follows- Table B ESTIMATED RESIDENT POPULATION BY AGE GROUPS, 30 JUNE, 1983 Age groups (years) Number Males Females Persons Percentage Males Females Persons 0-4... 7,234 6,981 14,215 5.4 5.2 10.6 5-9... 7,532 6,940 14,472 5.6 5.2 10.8 10-14... 7,190 6,800 13,990 5.4 5.1 10.4 15-19... 5,657 5,374 11,031 4.2 4.0 8.2 20-24... 6,838 6,746 13,584 5.1 5.0 10.1 25-29... 7,689 7,110 14,799 5.7 5.3 11.1 30-34... 7,509 6,707 14,216 5.6 5.0 10.6 35-39... 6,329 5,079 11,408 4.7 3.8 8.5 40-44... 4,813 3,486 8,299 3.6 2.6 6.2 45-49... 2,971 2,330 5,309 9.9 1.7 4.0 50-54... 2,571 1,719 4,290 1.9 1.3 3.2 55-59... 1,960 1,265 3,225 1.5 0.9 2.4 60-64... 1,187 923 2,110 0.9 0.7 1.6 65-69... 693 648 1,341 0.5 0.5 1.0 70+... 803 784 1,587 0.6 0.6 1.2 All Ages... 70,976 62,900 133,876 53.0 47.0 100.0 Source: ABS Catalogue 1201.0 Senator ROBERTSON —I thank the Senate. The figures set out in this table show quite clearly that 31.8 per cent of the population are between the ages of 0 and 14, but only 2.2 per cent in the 65 plus bracket. In other words, the Territory consists mainly of younger families, people without the advantage of grandparents, whose older members of the family live south. The normal graph is skewed towards the bottom end. Grandparents live away from the Northern Territory. I am sure the Opposition would not deny the great value of contact with grandparents by young people. Older people tend not to live in the Northern Territory. The main reason is another issue I have to raise now, and that is climate. The air fares were initially introduced to allow people a break from the distressing conditions of living in the north. I have spoken on this aspect in this place before and the following table reinforces this. I seek leave to incorporate table C. Leave granted. The table read as follows- Table C MEAN TEMPERATURE BY MONTH, 1984. (0C) Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Darwin... Max 31.1 30.2 31.2 32.6 32.7 30.5 29.4 30.9 31.9 33.5 33.0 32.2 Min 24.6 24.4 24.6 24.2 23.3 19.9 18.8 21.5 23.4 25.3 25.9 26.0 Nhulunbuy... Max 32.5 30.6 30.8 31.6 30.9 29.3 28.2 29.3 30.5 31.6 32.5 32.5 Min 26.6 24.7 24.9 24.4 23.7 21.6 20.2 20.3 21.9 23.3 24.5 26.2 Tennant Creek... Max 33.0 35.2 32.0 30.9 28.7 24.2 22.6 27.9 28.2 33.7 41.0 38.2 Min 23.0 23.6 22.2 19.5 16.8 12.8 10.9 14.4 15.7 20.7 24.2 25.3 Source: Bureau of Meteorology. MEAN HUMIDITY BY MONTH, 1984 (per cent) Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Darwin... 9 a.m. 86 88 85 69 65 51 59 68 74 62 71 76 3 p.m. 72 75 73 46 40 33 38 41 53 49 60 68 Alice Springs... 9 a.m. 49 34 34 35 43 37 61 26 39 29 19 28 3 p.m. 31 18 20 26 25 21 32 33 24 16 12 19 Tennant Creek... 9. a.m. 64 54 49 40 37 37 50 34 35 25 26 46 3 p.m. 41 27 35 25 22 19 29 18 36 16 13 20 Source: Bureau of Metorology. Senator ROBERTSON —I thank the Senate. The graph shows clearly the temperatures and mean humidities. I will not go through them all, but let me simply say that when our friend Brian Bury in the morning says that in Darwin it is 34 degrees and bonza, it certainly is hot. It is hot, sticky and very unpleasant and it is like that for a good deal of the year. But we in the Northern Territory have so many advantages that those of us who are younger are quite happy to put up with it. Let me look at some other special features of the Northern Territory-mining, for example, one of our larger industries. There are two features worth mentioning, and I think they are best dealt with by reading the section on mining in the Treasurer's statement: At present, excess deductions for exploration and development expenditure cannot be transferred to another company, even where the companies satisfy the 100 per cent common ownership test. Mining companies therefore cannot take full advantage of the group loss provisions available to other companies. As canvassed in the draft White Paper, the Government has decided to extend that opportunity to petroleum and general mining companies. This will apply to excess deductions from exploration and development expenditures incurred in 1985-86 and subsequent income years. The estimated revenue costs of this measure are $70 million in 1986-87 and $65 million in 1987-88. The Government also proposes to freeze, until the 1986-87 Budget, the difference between the diesel fuel excise and the diesel fuel rebate for diesel fuel used in mining operations. The rebate will be further reviewed in the context of the 1986-87 Budget. I am sure that even our friends in the Chamber of Mines in the Northern Territory will be very gratified with that inclusion in the tax package. I turn to the subject of primary production. The number of hobby farmers in the Northern Territory is increasing. We have mainly pastoralists, but there are a number of hobby farmers and there is something in the package for them also. I refer to page 14 where in the last three paragraphs under the heading `Quarantining of farm losses' the Treasurer's statement reads as follows: Partly offsetting these revenue gains will be a significant improvement in the primary production averaging provisions. An additional $20 million per annum benefit to farmers will arise from a complementary increase in the notional farm income limit for primary production averaging purposes, from the current level of $5,000 to the new level of $15,000. This represents a significant increase in the amount of non-farm income which may benefit from the averaging provisions. I believe that it is unfortunate that the Government has been thwarted in its attempt to bring in what it considered to be the best package. But once again I commend the Government on its courage in attempting to bring fairness back into the system. I think that is the key word on which the whole success of the package will hang. The average man in the street will see a fair system being introduced once again into taxation, and I congratulate the Government on what has been achieved. I must admit, in conclusion, that the people of the Northern Territory do not regard the finance section of our Government as necessarily their closest friends. I have to admit that Senator Walsh is not number one pin-up boy in the Northern Territory, but it is fair to say that some very unpopular decisions had to be taken. Perhaps some of the harshness which may have been included, and to which I have drawn attention within the party rooms-they are the place to do it-has been prompted by the extravagant waste of public funds by the Northern Territory Government. Senator Walsh has drawn attention to those in the more public arena here at Question Time. I believe that this package will go a long way to restoring good relations between the people of the Northern Territory and the Federal Government, and I commend the Bills to the Senate. Senator WALTERS(Tasmania)(9.56) —What an extraordinary speech! I was very interested to hear Senator Robertson say tonight that he would continue to talk against the recreation air fares not being exempt from the fringe benefits provisions. Indeed, he believed that it was very unjust that they should be included and that he would continue to talk about them. I wonder whether he will have the strength of character actually to vote against them. I shall be following that very clearly, because he has told us tonight that he has spoken to his constituents and spoke against it in the party room and tried very hard for them. But the whole strength of Senator Robertson's position is how he votes on that issue. We shall be interested to see whether he crosses the floor to vote according to his convictions. Senator Robertson —I will cross probably as often as you will. I have not seen you cross on the funeral one. Senator WALTERS —I have crossed the floor, as Senator Robertson well knows, on the referendums Bills and voted against my Party, because I believe that that was extremely important to me, and I had the courage of my convictions. I shall be interested to see Senator Robertson following the courage of his convictions when we come to vote on that matter. I was also interested to hear Senator Richardson tonight say-and it was completely false-that we had done nothing against tax evasion in the seven years we were in power. He knows as well as any other member of the Senate that until John Howard's legislation was introduced there had been no legislation regarding tax evasion. We introduced bottom-of-the-harbour scheme legislation that put an end to tax evasion-indeed, to the extent that the present Minister for Trade, Mr Dawkins, when he was in Opposition said: `Tax evasion is dead, it is no longer an issue'. Yet now Senator Richardson claims in this Senate that we did nothing to do away with tax evasion. It was completely immoral for a senator to stand in this place and carry on in that way. Tonight I intend to debate just one of the Bills with which the Senate is dealing this evening in the taxation package and I refer to the Medicare Levy Bill 1985. I shall confine my remarks mainly to that area. Senator Robertson —We are not surprised. Senator WALTERS —There is enough on the Medicare Levy Bill that will keep me going for the next 25 minutes. The only area of honesty in the whole of this debate tonight is that Medicare levy has been put in the taxation bracket, because that is exactly what it has become. It has become taxation-nothing more, nothing less. The fact that it is meant to be a levy paid on our health is just a farce. We have been told that the levy is no longer to have a ceiling-that that ceiling has been abolished from 1 July this year. Members of the public who are now above that ceiling will be paying as levy one per cent of the total of their taxable income. This is why I say that the levy is now part of the taxation laws of this country. It is no longer merely a levy. Taxation has gone up one per cent. This Bill also includes the increasing of the threshold below which people will no longer pay any of the levy. I welcome that increase because people on the lower incomes would find that one per cent very difficult to pay. As I say, removal of the ceiling really relegates the levy to an increase in taxation. Of course, that is another broken promise. We were told that that one per cent levy would not be increased. It was increased following the abolition of the ceiling. We must not forget that Dr Blewett said that Medicare would be funded by a one per cent income tax contribution and that the levy would not be raised. He has not raised the levy; it is still one per cent, but that one per cent does not cover and was never intended to cover Medicare. Indeed, the levy raises only $1,280m. But the cost of Medicare, according to estimates recently discussed by the Senate Estimates committees, is close to $3,700m. So the one per cent levy just covers about a third of the cost. Of course, the rest of the money comes out of Consolidated Revenue. It was a complete fraud at the time for the Minister to say that the levy would cover the cost of Medicare. He did not intend it to, he knew it would increase, and it was a convenient statement at the time. The total health care bill is well above that. Commonwealth outlays alone, leaving out what the States pay, in 1985-86 are estimated at $6,700m, an increase of $587m or 9.6 per cent in one year. that is well above the inflation rate. So our health care costs are going up quite considerably. What percentage of those costs does the levy now pay? That is very hard to come to. I have not yet received from the Department of Health an answer to the question I asked on the total expenditure, State and Federal. What has been the result of this wonderful scheme? We have had beds closed. We have had long waiting lists in public hospitals. Nurses and doctors have been on strike. Doctors have resigned. Dr Blewett told us that it was a wonderful scheme. It is certainly not a wonderful scheme. I will quote from the Medicare pamphlet that was delivered to all our homes. Dr Blewett said: The Medicare card will cure one of your biggest headaches. Very soon this card will cure just about everything that worries you about Health Insurance-the cost, the complications, the inconvenience and all the other headaches. What a statement! Clearly that was wrong. People have headaches. They are worried about the cost of health care and that cost keeps going up. Let us look at why the beds in the public hospitals are closing. They are closing because there are no nurses to service those beds. The nurses have been leaving the profession because they have been overworked and they cannot stand the strain and pressure they have been put under because of the Government refusing to pay fully the costs of the public hospitals. We have long waiting lists in all the public hospitals. I will cite just a few of the figures we have. Again, the Department of Health has not given me the answer to the question I asked in the Estimates hearing. I hope it comes before we go into the Committee of the Whole. I asked what the waiting lists were in the various States. I know that on 4 October in my home city of Hobart 2,105 people were waiting for elective surgery. That figure was up from 800. Eight hundred people were waiting for elective surgery before Medicare started. Now 2,105 people are waiting. In Victoria in September it was claimed that 25,700 people were waiting for elective surgery. We do not know what the numbers are in the other States and that is why I have asked the Department of Health to get them for me. We do not know what the figures are for South Australia, but the hospital administrator there says that the waiting lists are very long and are causing much concern. In New South Wales Dr Howarth, who is secretary of the branch of the Australian Hospitals Association, says that the waiting lists and waiting times are both increasing and that the public hospital system does not have the capacity to cope. He said that some patients will have to wait a long time for elective surgery and that we need to talk about it openly. So why are these other States-South Australia, Western Australia and New South Wales-not telling us the figures? There is not the problem in Queensland because it has always had a free hospital system. My State is willing to say what its waiting list is and so is Victoria, but these other Labor States are not willing to put forward their figures. I wonder why. Let us look at the nurses on strike-the next problem Medicare has caused. In Victoria the nurses have been awarded a 9 per cent increase. In Tasmania our nurses are being paid 9 per cent less than original income of the nurses in Victoria. What will happen to their wages? Will they go up by 18 per cent to keep in line with the wages of Victorian nurses? If they do not I can assure honourable senators that there will be such an outflow of nurses from Tasmania to Victoria that we will not be able to run our hospitals at all. Will the Commonwealth Government meet the costs of these sorts of things? In New South Wales doctors resigned because they were treated so poorly by Dr Blewett and this wonderful scheme which was introduced because of a fraudulent claim that two million people were uninsured. That was the reason we were given for the need to introduce Medicare. In Estimates hearings I asked whether that two million people included all the Queenslanders who already had a free hospital scheme and were able to go to the out-patients departments and hospitals for nothing. I was assured that yes, the figure did include all the Queenslanders. It also included members of the defence forces. Neither Queenslanders nor members of the defence forces needed medical cover. That fraudulent claim was given as the reason for the need to introduce Medicare. We said at the time Medicare was introduced that it would create a tremendous problem for the hospitals, that people would seek further unnecessary services. Indeed, that is the situation at the moment. In 1982-83-again this information was given to the Estimates Committee-the number of services was 96 million. By 1983-84 the number of services had increased by 14 million. There are now 110 million services and the figure has continued to go up. Last year there were 113 million services. So we find that the situation we warned about has developed. We warned that there would be overservicing and people would be seeking services which previously they considered to be unnecessary. We find that this year it is anticipated that medical benefits payments will increase by 11 per cent, or $255m. These are the costs resulting from Medicare. However, there are many other areas of great concern. I mentioned them in a previous speech on the Medicare levy, but I believe they need repeating because the Government seems to ignore completely the fact that there are so many anomalies in the areas of payment of the levy by families. Senator Maguire, who spoke about the various family types, said that single income families with two children would be exempt from the levy if they had an income of $15,564. What he did not say was that there were anomalies and I sincerely hope the Department looks at these because they ought to be fixed and it would be simple to do so. Let us look at the various types of families on $16,000 a year. A single person on $16,000 pays a $160 levy. A married couple with one income of $16,000 pays the same levy-$160. A single income couple on $16,000 with one dependent child pays the same levy-$160. A couple with no dependants, one on an income of $8,000 and the other on the same income of $8,000-which makes a combined income of $16,000-pays a levy of $10 less a year; they pay $150. I have no idea why that should be, why a two-income family on $8,000 each pays less than a couple with one dependent child on the same family income. Why should a family with a child pay more than a couple without children? I would like some answers from the Minister and I would hope he could get them from the Department. Another couple with no dependant children, one on an income of $10,000 and the other on an income of $6,000-their income still totals $16,000-pays only $100 levy. That couple with no dependent children pays only $100 levy while a couple with one child pays $60 more. Let me go further. Take a couple with no dependent children on an income of $9,000 and $7,000. Their combined income still totals $16,000. What is their levy? It is $90. They are paying only $90 while a single income family with one child pays $70 more. It seems incredible that this situation has arisen. If one goes further one finds that a married couple with a single income of $16,000 and two children pays a levy of $87.20. Another couple with two dependants-one parent on an income of $8,000 and the other on an income of $8,000-pays the same levy, $87.20. Another couple with two dependants-one parent on $10,000 and the other on $6,000-again pays $87.20. We have these anomalies that I previously brought to the attention of the Department. The Department is well aware of them but the Government is doing nothing and the Department is, of course, completely unconcerned that these anomalies occur. A single income family with a dependent child pays more than a couple who have no dependent children. I believe that the anomalies should be looked at. As I have said, Medicare is a complete shambles. Its cost is going up. The Government has decided that it will brazen it out and that it will not increase the levy. It will attempt to continue to defraud the public into believing that the levy pays for Medicare when, at this stage, it is not covering a third of its costs. I ask the Minister whether he will answer later in the debate the queries that I have regarding the anomalies. I believe they deserve an answer. The people of Australia need to know that the Medicare levy is at least a fair and equitable way of health insurance. (Quorum formed) Senator BOLKUS(South Australia)(10.18) —I also wish to participate in this debate and in doing so support the tax package brought down by the Australian Government. We have in this tax package a most comprehensive and significant reform of the Australian taxation system. It is the culmination of a consultative process which offered, for the first time in our history, all Australians a say in how tax revenue should be most fairly gathered. It also created an expectation within the community that major taxation reform was imminent. The overwhelming message to come out of this democratic process was that the tax burden had to be distributed far more equitably. Low income and average wage earners would no longer put up with the widespread tax avoidance undertaken by those on higher incomes; nor would they abide being fiscally dragged into higher tax brackets with no avenue for redress. What was required-what came out of the consultative process as being desirable-was a full scale overhaul of the system so that those in a position to pay met their responsibilities, thus introducing at least some equity into our tax system. At the end of the day we now have a tax package which reverses a firmly entrenched trend, a trend which years of conservative government helped to fortify, which generations of corporate criminality helped to entrench and which years of irresponsibility from the High Court of Australia had protected. If reform had not taken place-we should address ourselves to this point-one million taxpayers would have moved into higher tax brackets and over 140,000 pensioners would have risked losing their welfare rights. More importantly, average wage earners would have continued to subsidise, through the tax system, the social lives and habits of high income earners. People receiving welfare payments would have continued to struggle in the vicious poverty cycle, unable to supplement their welfare incomes for fear of losing them altogether. The measures proposed by the Government, I believe, go some way towards redressing these inequities. Indeed, they go a long way to doing so. The first point that I wish to concentrate on in particular is the new marginal rates. The enormity of the reform is indicated by the fact that the package will cost over $4.5 billion. What this means for a typical taxpayer is an income tax cut of about $6 a week from September 1986 and more from July 1987. The revised rates will mean a lighter load for honest taxpayers and a much reduced incentive to avoid tax. The old 60c top marginal rate was blamed by many people in the community for discouraging incentive and encouraging people to devise tax avoidance schemes. If such claims are correct, there is in this package a challenge to the high income earners. If they do not respond, of course there is the fall back position; the raising of the company tax rate to the same level as the highest personal tax rate should at least reduce the incentive to avoid tax by forming a company. Corporate tax reform is the second and one of the most important parts of the package. Reform of the company tax system has been long overdue. There are many ways in which the tax burden has decreased on the corporate sector over the years. In the last 10 years at least the burden of the tax share paid by the corporate sector in Australia has decreased by approximately $2.5 billion. This is money that has to be met by individual taxpayers. Further, as at 30 June 1984 outstanding tax debts to the Australian Taxation Office stood at almost $2 billion. That figure represents the extent of tax avoidance, trust stripping and company stripping which are undertaken mainly by the corporate sector in this country. The enormity of the problem can be seen in the figures for the financial year 1983-84 in which tax avoidance represented one-quarter of total collectible tax. This means that the Australian economy was in fact robbed of a quarter of its entitled revenue. I have mentioned some ways in which the corporate sector has been able to reduce its tax burden. In terms of the problem of tax reform I think we should address ourselves to one way of avoiding tax that has appeared in the United States of America. A recent investigation of the affairs of major American companies such as General Electric, W. R. Grace and Co., General Dynamics and others has revealed that a firmly entrenched system has prevailed for opting out of the tax system. By its use of the Reagan investment incentives and the loophole ridden corporate tax code that applies in the United States, companies such as General Electric manage in fact not to pay taxes at all. General Electric managed to claim a negative Federal income tax bill of $283m for the years 1981 to 1983. In fact, at the end of the day, the United States Government actually owed GEC money. This was despite the fact that that company's profit for the period was $6.5 billion. General Dynamics is another example. America's major defence contractor has not paid Federal taxes since 1972, a period during which it has reported a profit of more than $2 billion. The major chemical and oil conglomerate, W. R. Grace and Co., actually made a small profit from the United States tax code in the years 1981 to 1983 despite its accumulated profit for the period of $684m. In that country the taxation procedures and loopholes were used by the corporate sector not only to reduce its income tax but in fact to recover funds from the Treasury. Fortunately, I believe that the Australian system has rid itself of some of the lurks and loopholes which are still available to United States tax avoiders. But that is not to say that we have eradicated the problem altogether for in fact there seems to be no stopping major corporations from avoiding tax by mechanisms designed to shift profits, usually by the system which is commonly described as transfer pricing. As most honourable senators would know, this system is one under which, by the use of internal manipulative practices, profits are shifted from a high tax country to a low tax country to reduce the overall company tax burden. It enables them, in other words, to maximise world-wide profit and to minimise tax. The consequent result of such procedures is that the economies of countries such as Australia suffer through the loss of tax revenue and, in turn, individual Australian taxpayers have to foot the bill. The scheme is a simple one and it works in a simple way. As I said, the underlying principle is to shift the profits to a country with a low tax rate. Whether that country be Hong Kong or elsewhere, this system has been and can be used. It is a system that is used not only for reducing taxes and in this respect the sovereignty of countries such as Australia is affected by these mechanisms. The mechanism may be used to siphon funds out of countries that curb remittances, threaten to control prices to minimise high customs duties, to show low profits so as to discourage other companies from entering the market and even to fight off wage demands. I mentioned earlier that I believe to a certain extent this system has been eradicated in this country. However, I do not believe it has gone altogether. It is in fact difficult to measure the extent to which it is applied here because we have not to date had sufficient examples of its occurrence. In fact, we have not had sufficient investigation as to its occurrence. The National Times of 11 October carried a story about profit shifting arrangements occurring within the aluminium industry in Australia. Such a practice is not unprecedented in this industry. People will remember a similar sort of scam which was used in the 1970s by another aluminium company. According to the most recent report, the Swiss based aluminium company Alusuisse is disputing its $15m tax bill with the Australian Taxation Office for its operations in Australia in 1978 and 1979. The Taxation Office estimated the company's income for the period to be $US100m a year. However, during that period the company exported most of its alumina and bauxite to foreign subsidiaries which paid on a cost plus basis, not on market prices. Profits were therefore minimised and I believe as a consequence the company attempted to reduce its tax burden. The Government and the Taxation Office should be complimented in this instance in that they are seeking through mechanisms which have been introduced over recent years to recover the rightful amount of tax that should have been levied on the company's activities during this period. As I said, the effect was to cut taxes in this case. The most recent research on the matter has been carried out by Greg Cragh of the transnational corporations research project at Sydney University. He has estimated that as much as $500m may in fact have been removed from Australia between 1972 and 1984 because of this particular scam. This is something which I believe should be further investigated. It is something that I will be pursuing through the avenues that are available to members of parliament. I seek leave to continue my remarks later. Leave granted; debate adjourned. Bill received from the House of Representatives. Ordered that the Bill may be taken through all its stages without delay. Bill (on motion by Senator Gietzelt) read a first time. Senator GIETZELT(New South Wales-Minister for Veterans' Affairs)(10.28) —I move: That the Bill be now read a second time. I seek leave to have the second reading speech incorporated in Hansard. Leave granted. The speech read as follows- This Bill is an omnibus Bill implementing many of the major social security and repatriation initiatives of the 1985-86 Budget. In the Budget, the Government provided for an increase in expenditure on social security and welfare of $110 million in 1985-86 and $245m in a full year. This is in addition to increases in expenditure that automatically result in 1985-86 from factors such as the indexation of pensions and benefits and increased numbers of pensioners and beneficiaries. In combination, these increases in social security and welfare outlays are considerable and demonstrate the Government's commitment to improving the adequacy of assistance for those most in need. They have been achieved within an overall economic strategy that also will be of substantial benefit to low income groups by reducing unemployment and inflation. The Bill provides substantial increases in assistance to those most in need. For example, as a result of these initiatives and the November indexation increases- A sole parent pensioner who has two children will receive almost $8 a week extra from November 1985, and almost $10 a week extra from next May; a single unemployed adult aged 21 or over who rents privately could receive more than $16 a week extra from May 1986; and an unemployed couple aged 18 or over who have two children and are renting privately could receive up to $10 a week extra from November 1985 and up to $20 a week extra from May 1986. The Bill also implements several initiatives concerning programs administered by the Minister for Community Services. I will give details of the financial impact of the measures in this Bill as I deal with each major initiative. SOCIAL SECURITY ACT 1947 The major budget initiatives dealt with in Part VI of this Bill consolidate and extend the steps taken by the Government in the previous two Budgets to provide additional assistance to those in greatest need in our community. In particular, the Bill seeks to address the needs of low income families, single parents, and people who are unemployed. Additional assistance will also be provided to people receiving sickness and special benefits. Other special needs have also been addressed. Increase in Assistance for Families This Government is strongly committed to improving the level of assistance provided to low income families with dependent children. Accordingly, we have built on the priority we gave these families in the previous two Budgets by again increasing payments to them. From 1 November 1985, the additional pension or benefit payable to each child in the care of a pensioner or beneficiary will be increased by $2 to $16 a week per child. (This increase will not apply after 1 January 1986 in relation to young people who receive assistance through the Secondary Assistance Scheme or the Tertiary Education Assistance Scheme.) In conjunction with this increase, the maximum rate of family income supplement, a payment made to low income families not receiving a pension or benefit, will also increase by $2 to $16 a week per child. Together with the $2 increases provided in each of the last two years, these payments will have been increased by 60% since this Government came to office in 1983. In 1985-86 these measures will benefit an estimated 309,000 social security and repatriation service pensioner and 114,000 beneficiary families, as well as 26,000 families in receipt of family income supplement. The net cost will be an estimated $56.3m in the current financial year and $86.2m in a full year. The Bill also provides for a 20 per cent increase in the rate of mother's/guardian's allowance from 1 May 1986, bringing the maximum rate to $12 a week. This allowance is provided in recognition of the particular needs of sole parents and is paid in addition to additional pension or benefit paid for each child. In 1985-86 an estimated 267,000 pensioners and beneficiaries will benefit from this measure at an estimated cost of $5.4m in the current financial year and $28.9m in a full year. The Bill introduces a new category of pension from 1 November 1985 for people providing constant care and attention on a long term basis for a severely handicapped age or invalid pensioner spouse or close relative at home. The new carer's pension will replace the existing spouse carer's pension, which is paid only to men caring for their wives. The provision of a pension to those caring for invalid near relatives (for example-aged parents) is an important Government initiative. The carer's pension is estimated to cost some $1 million in the current financial year and $1.6m in a full year. These figures take into account savings from those persons currently receiving spouse carer's pension or special benefit who are expected to take up the new pension. From 15 November 1985, the Government will introduce special additional assistance for families with multiple births. An increase of family allowance payments of $150 a month for triplets and $200 a month for quadruplets and higher multiple births will be made until the children reach the age of six. Being an increase in family allowance, these amounts will not be taxable or means tested and will be made in addition to other income support payments. The previous system of discretionary Act of Grace payments for quadruplets and higher multiple births will be discontinued. In 1985-86 180 families with triplets and 6 families with quadruplets are estimated to benefit from the increased payments at an estimated cost of $200,000 in the current financial year and $300,000 in a full year. Initiatives for People who are Unemployed One of the Government's major 1983 election commitments was to restore progressively the rate of unemployment benefit for single adults to parity with the standard rate of pension. Before November 1978, the single adult rate of unemployment benefit was the same as the single rate of pension and sickness benefit. The previous Government excluded it from automatic pension and benefit indexation arrangements, causing its real value to decline substantially. As a result, single adult unemployment beneficiaries were subject to discrimination and required to bear the greatest burden during the economic recession. Since coming to office, we have moved to end this discrimination by progressively closing the gap between this group and single pensioners and sickness beneficiaries. In 1983, we increased the rate of single adult unemployment benefit by $9.20 a week in two stages. We also provided for automatic indexation of the rate from May 1984 and made special ad hoc increases above the requirements of indexation in May and November of 1984, and in May 1985. In keeping with our election commitment, this Bill provides further assistance. From November 1985, the rate of unemployment benefit for single people aged 21 years and over will be raised by $3 a week in a special ad hoc increase. Along with an indexation increase of $3.25 a week, the rate will rise to a total of $91.45 a week. In 1985-86 this initiative will affect on average some 247,000 unemployment beneficiaries at an estimated cost of $25.7m in the current financial year and $41.8m in a full year. In addition, we will create a new category of unemployment benefit for single people aged between 18 and 20 from 1 November 1985. To establish an intermediate rate, unemployment benefit payments for 18-20 year olds will not be subject to automatic indexation increases. This will result in savings of $14.9 million in 1985-86. The new intermediate rate of $88.20 a week will be created by an ad hoc increase of $3 a week to the current single adult rate. Further ad hoc increases will be made from the beginning of 1987 and 1988. At that point, the Government intends that the intermediate rate of unemployment benefit will be equal to the level of Tertiary Education Allowance paid to students who live away from home. Both rates will then be automatically indexed at the beginning of each subsequent year. An estimated average of 101,000 unemployment beneficiaries will benefit in 1985-86 from the ad hoc increase which creates the intermediate rate. The estimated cost will be $10.4 million in the current financial year and $16.1m in a full year. The single junior rate of unemployment benefit will increase from 1 November 1985 by $5 to $50 a week. Currently, only people aged 16-17 years who have been receiving unemployment benefit for 6 months or more receive this higher rate. This increase means that since March 1983, the rate of unemployment benefit for 16-17 year olds will have risen by 25 per cent. An estimated 34,000 unemployment beneficiaries will benefit in 1985-86 from this initiative at an estimated cost of $5.8 million in the current financial year and $8.9 million in a full year. There is another measure in the Bill which is of major significance for people who are unemployed. From 1 May 1986, rent assistance of up to $10 a week will be available, for the first time, to people over 18 years who have been receiving unemployment benefit for 6 months or more and who rent privately. This measure will not apply in the case of a single beneficiary who has no dependents, is under 25 years and is living at home. This initiative recognises the increasing reliance on unemployment benefit as a means of long-term income support. In 1985-86 the measure will assist some 109,000 unemployment beneficiaries at an estimated cost of $9.1m in the current financial year and $56.4m in a full year. A further measure to assist unemployed people, intended to be introduced in a Bill later in the current Sittings, is the easing of the income test. From May 1986, unemployment beneficiaries will be able to earn an extra $10 a week and still qualify for full payment. The `allowable income' limit will increase from $20 to $30 a week, making the income test free amount for beneficiaries the same as that for single pensioners. This will help overcome the poverty trap that discourages beneficiaries from seeking part-time work. This measure will benefit approximately 40,000 unemployment beneficiaries in 1985-86 at an estimated cost of $1.6m in the current financial year and $9.7m in a full year. Sickness and Special Benefits Single sickness and special beneficiaries aged 16-17 who have received benefits for less than six months will receive the rate of $50 a week from November 1984, an increase of $5. Rent assistance of up to $10 a week will be paid from May 1986 to special beneficiaries aged 18 and above. It will be paid on the same basis as for unemployment beneficiaries. Sickness and special beneficiaries will also benefit from the liberalisation of the income test that will be introduced in legislation at a later stage in these Sittings. Some 6,400 sickness beneficiaries and 7,000 special beneficiaries in 1985-86 will benefit from these initiatives, at an estimated cost of $1m in the current financial year and $4.4m in a full year. In addition, certain sickness and special beneficiaries who are paid at the unemployment benefit rate will receive similar increases to those received by unemployment beneficiaries. This will benefit an average of 27,000 sickness and special beneficiaries at an estimated cost of $2.9m in the current financial year and $4.7m in a full year. Other Measures A major initiative in the Bill will facilitate respite care arrangements for parents of handicapped children. From 1 November 1985, the handicapped child's allowance will remain payable for up to 28 days a year while the child is temporarily absent from the family home and in respite care in an institution. This will enable the parents of severely handicapped children to take a break or holiday at least once a year. The estimated cost of this measure is $65,000 in the current financial year and $100,000 in a full year. From 1 November 1985, the waiting period which must be undergone by some persons qualified to receive an unemployment or a sickness benefit will not apply where a beneficiary is transferring from another social security income support payment. In addition, there will be no waiting period for the spouse of a person who received an additional amount of such a payment, where the spouse qualifies to receive such a payment. The Bill also clarifies and rationalises the rules concerning overpayments of social security pensions. Specific rules will provide for the creation of a legally recoverable debt if payment continues after the pensioner ceases to qualify for the pension. In addition, specific rules will provide for the creation of a legally recoverable debt where the amount of pension to which a pensioner is entitled is reduced, but the pensioner does not duly notify the change in his or her circumstances. The relationship between social security pensions and benefits and repatriation service pensions will also be rationalised to prevent overlap of entitlements and ensure that overlapping payments will be legally recoverable. The Bill also includes provisions which will permit the waiver and write-off of debts arising under the Act to improve administrative efficiency. REPATRIATION ACT 1920 Repatriation service pensions are similar to age and invalid pensions except that, where granted on the ground of age, they are available at the age of 60 for men and 55 for women. Service pension rates are calculated by reference to the rates of pension payable under the Social Security Act 1947. Increases in the additional pension for children and mother's/guardian's allowance payable to Social Security pensioners will also apply to service pensioners who are in similar circumstances. Some 6,500 service pensioners will benefit from increases in additional pension for children and a further 280 families will benefit from increases in guardian's allowances. These measures will cost an estimated $600,000 in the cureent financial year and $950,000 in a full year. The Bill provides for increases in allowances paid to veterans suffering certain amputations or loss of vision, in attendant allowance and in pensions paid to orphans. The increases will have effect from 7 November 1985 and represent movements in the Consumer Price Index in the twelve months since increases in last year's Budget. Higher amounts for certain other amputations are adjusted automatically in May and November in line with any movements in the Consumer Price Index in the six months period ending in December and June, respectively, of the relevant year. The rate of attendant allowance is to be increased from $53.80 to $57.40 a fortnight in the case of the veteran who is blind or is suffering from a cerebro-spinal injury. In the case of a veteran who has had both arms amputated or who is blind and has lost hearing or speech, the allowance is to be increased from $107.60 to $114.80 a fortnight. This allowance is also paid in addition to disability pension. A double orphan's pension will be increased from $76.80 to $82.00 a fortnight while the increase for a single orphan will be from $38.40 to $41.00 a fortnight. These measured will cost an estimated $120,000 in the current financial year and $190,000 in a full year. Other initiatives for increases in recreation transport allowance and clothing allowance will be achieved by amendment of the Repatriation Regulations and associated Regulations. The Repatriation Act provides for the payment of a spouse carer's pension to a man caring for his severely handicapped veteran wife. This pension will be extended, in line with the creation of the social security carer's pension, to cover near relatives caring for severely handicapped veterans. The extension is not expected to affect a large number of people and the costs are expected to be negligible. The Bill will rationalise rules concerning overpayments of pensions along the same lines as the changes to the Social Security Act. Similar provisions for the waiver and write off of debts are also included. SEAMEN'S WAR PENSIONS AND ALLOWANCES ACT 1940 The Bill also makes consequential amendments to the Seamen's War Pensions and Allowances Act 1940. That Act provides benefits similar to those provided under the Repatriation Act to Australian mariners who suffered a war injury during World War II. The Bill implements two major measures in relation to legislation administered by the Minister for Community Services. AGED OR DISABLED PERSONS HOMES ACT 1954 Under this Act, the Commonwealth pays a personal care subsidy and a hostel care subsidy to eligible organisations which provide hostel type accommodation for aged or disabled people. These subsidies are payable at weekly rates. The Commonwealth also provides a respite care bed subsidy to encourage the provision of respite care beds in hostels. Respite care bed subsidy of $11 a week is payable in respect of an approved respite care bed which is occupied for 14 days or less during a 28 day period. $55 a week is payable where the bed is occupied for at least 15 days during the 28 day period. Unfortunately, this arrangement has tended to cause distortions in availability of respite care beds as advantage is taken of the differential subsidy levels. The Report of the Joint Review of Hostel Care Subsidies Arrangements recommended that payment of hostel care subsidy, personal care subsidy and respite care bed subsidy should be converted to a daily basis without reducing the total amount of Commonwealth recurrent subsidies for hostel care (policy recommendation 9 (b)). Accordingly, the Government has decided that hostel care, personal care and respite care bed subsidies will be paid on a daily basis calculated with effect from 18 December 1985 and to be paid in January 1986. The daily rates to apply are $1.80 per day for hostel care, $7.80 per day for personal care and $7 per day for respite care. The revised arrangements are estimated to add $1.3m to outlays in 1985-86 and $2.3m in 1986-87. NATIONAL HEALTH ACT 1953 Under this Act, benefits are paid by the Commonwealth to approved nursing homes for all qualified patients in such homes. The benefit rates are prescribed in the National Health Regulations and are reviewed annually. In the `May Statement', measures were announced which are directed to slowing the rapid growth of nursing home outlays that has occurred over the past decade. One of those measures included freezing the level of Commonwealth nursing home benefits in government nursing homes in all States and Territories, except in some government nursing homes run by non-profit charitable or benevolent organisations. The Bill amends the National Health Act so as to enable different rates of benefit to be prescribed for different classes of approved nursing homes. Mr President, the measures contained in this Bill demonstrate the Government's commitment to assisting those most in need in our community. I commend the Bill to the Senate. Debate (on motion by Senator Reid) adjourned. The PRESIDENT —Order! It being 10.30 p.m., under sessional order I put the question: That the Senate do now adjourn. Senator REID(Australian Capital Territory)(10.30) —In a sense I want to ask a question of the Minister for Finance and Minister Assisting the Prime Minister for Public Service Matters (Senator Walsh) but it will take a little more time than one would normally have to ask a question at Question Time. What it really amounts to is whether or not public servants who have an accident of one kind or another are being adequately looked after. I suggest that there is good reason to ask that question. Perhaps the Commonwealth Medical Officer does not have sufficient facilities to do the job that he is required to do and so has to report in what would be regarded by many people who are off work as an unreasonably long time. I have written to the Public Service Board on a number of occasions and have not had responses to my letters. That is the reason why I put these questions to the Minister. It is not my purpose or intention to use the names of my constituents and I do not believe that they would want me to do so but the Public Service Board will find my letters amongst its files and I can certainly make the names known to the Minister. One constituent who came in had had an accident at work in June 1984. Since then he has been off work and has suffered considerable financial hardship as a result of what occurred. He has been to the Commonwealth Medical Officer on a number of occasions, but the real problem is the uncertainty of not knowing what is going to happen, whether he is likely to be redeployed or invalided out. Perhaps the Board does not appreciate what uncertainty does to someone who has to cope with an illness or some other problem. In this particular instance I wrote to the Chairman of the Public Service Board on 16 July and again on 14 August, but still I have had no response and this person lives on from day to day not knowing what his future holds. Another constituent who has a repetition strain injury problem is now back at work in a redeployed capacity but doing very menial work. She is in a sense subject to some ridicule by others around her; she is still being paid her original salary but has not been redeployed in a meaningful way. She finds this extremely stressful and she feels unsettled. She feels that she is just filling in the day doing meaningless jobs whereas if some attention were given to her situation she would still be able to be a productive and useful member of the Public Service, fulfilling a useful role. She feels that nobody cares about what happens to her. Another constituent had an accident at work at the Royal Mint. He has been off work virtually since April 1984, having taken sick leave and other sorts of leave. He has been examined by the Medical Officer on a number of occasions but still does not know whether the verdict is that he is fit or not fit, whether he will or will not be going back to work. Again there is incredible uncertainty. In this case the man spends his days living in a flat with not much more than the four walls and perhaps his television set to keep him company. He is not able to plan his future because he has not been able to get from his employer an answer which must come from, in the first instance, the Commonwealth Medical Officer. Another constituent who has had RSI has been off work since October of 1984. She believes that she would be able to be gainfully employed. There are other instances. I suggest, as I said earlier, that perhaps the uncertainty of not knowing what the future holds is the real problem that does not seem to be recognised and understood. I have letters on file which remain unanswered. It is almost as though those in the Public Service who have been injured in an accident and are not able to work are treated as some form of second class citizens, as though they have been the authors of their own injuries and are no longer worthy of concern. The problem is not just physical injury; it is being left in this sort of limbo where they do not really know whether or not anyone cares about them. Answers are expected for these people. We need to know whether or not the Commonwealth Medical Officer has sufficient resources to do the job that he is required to do, and I hope that it is not just that there is a lack of will to find solutions to these problems. I ask the Minister in this place who represents the Public Service Board whether he will look into these matters and show some concern for those who do have injury and are off work but want to go back or at least want to know what the future holds for them. Senator GIETZELT(New South Wales-Minister for Veterans' Affairs)(10.35) —The details of the matters raised by Senator Reid certainly need some attention and I will see that they are brought to the attention of the Minister Assisting the Prime Minister for Public Service Matters (Senator Walsh). Question resolved in the affirmative. Senate adjourned at 10.35 p.m. The following papers were tabled: Lands Acquisition Act-Statement by the minister describing land acquired by agreement under sub-section 7 (1) of the Act, for specified public purposes. Quarantine Act-Determination-Notice under section 86E, together with a statement by the Minister, dated 1 October 1985.