Wednesday, 6 November 1985 The PRESIDENT (Senator the Hon. Douglas McClelland) took the chair at 10 a.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 House assembled. The petition of the undersigned citizens of Australia respectfully showeth that we believe that our protected wildlife are not suitable subjects for laboratory experimentation and that repetitive and needless experiments should be prohibited. And your petitioners as in duty bound will ever pray. by Senator Chipp (from 14 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 66 citizens). To the Honourable the President and members of the Senate assembled, The petition of the undersigned respectfully showeth that: 1. The Watsonia Army Barracks contains electronic communication facilities, operated by Australian and American personnel, that gives the United States the ability to pin-point Soviet nuclear submarines, hidden in the Oceans. 2. This would make it possible for U.S. killer-sub- marines to destroy all Soviet nuclear submarines, while the U.S. nuclear submarines launch their missiles in a `first strike' attack. This makes Watsonia a potential nuclear target. A nuclear attack on Watsonia would have a disastrous effect on Melbourne. 3. The `joint U.S.-Australian' bases in Australia endanger rather than protect us. They also add a new menace to the nuclear arms race, that must be stopped. Your petitioners most humbly pray that the Senate in Parliament assembled should close the `joint Australian-U.S.' electronic communication facilities in the Watsonia Army Barracks. by Senators Chipp (from 72 citizens), Cooney (from 90 citizens) and Zakharov (from 54 citizens). To the Honourable the President and members of the Senate in Parliament assembled. The Petition of certain citizens of South Australia respectfully showeth: That the Australian flag symbolises the continuity between Australia's past, its present and its future; That the presence of the Union Jack on the flag represents not a subservience to Britain, but a reminder of our inheritance of the fruits of hundreds of years of struggle for individual liberty against the forces of tyranny and oppression; Nonetheless recognises the rights of Australians should they so wish to change the design of their flag. Your petitioners humbly pray that no change be made to the Australian flag except with the consent of the people in a referendum. And your petitioners, as in duty bound, will ever pray. by Senators Haines (from 1,003 citizens) and Messner (from 14 citizens). To the Honourable the President and members of the Senate in Parliament assembled. The humble petition of we the undersigned citizens of Australia respectfully showeth that:- The unrelenting ever expanding money extortion to which home purchasers are being subjected has exceeded the bounds of all logical reason. It is neither linear or progressive. It becomes transparently clear that the constant edging up of interest rates for investors by banks, lending institutions, and banking consortiums are collectively responsible for the monetary explosion, lack of employment and all that that entails and is causing grave social disruption to hundreds of thousands. Behind it all, the absence of control that is now politically essential in the interest of justice and fair distribution of burden. No government, recent or future should tolerate this cruel, vicious procedure that shatters the existence of family life, together with all the well known disastrous repercussions that follow. Your petitioners therefore humbly pray that your House urge all politicians to unite nationally to do all within their power to reduce interest rates across the board and that: This country needs a five year period to reduce this unwarranted absurdity by tackling it at it's source, as follows: firstly a 2 per cent annual interest reduction on home loans, until it is down to 6%. This to come into force immediately subject to the urgent necessary legislation. This would, or should curtail union demands, and cause no hazard for investors, who could reinvest in Government projects, or other worthwhile ventures. It would also certainly ease the burden on social securities. Your petitioners as in duty bound will ever pray. by Senators Crowley (from 105 citizens) and Haines (from 450 citizens). To the Honourable the President and members of the Senate in Parliament assembled. The humble petition of the undersigned citizens of Australia respectfully showeth: That we the undersigned, having great concern because of the spread of moral pollution in our nation call upon the Government to introduce immediate legislation: 1. To provide strict controls over importation, production, sale, hire or mailing of video-cassettes with the open sale of only G, PG, and M rated video-cassettes; and the total prohibition of the sale of R rated video-cassettes so that R rated films can only be viewed in an adult theatre by persons over 18 years. We totally reject the concept of ``X'' rated video-cassettes which would allow the legal sale of hard-core pornographic films for screening in the homes of our nation, which endanger our children. 2. To dramatically improve the Federal Attorney-General's Guidelines for Classification of Video tapes/discs which restrict the importation, production, sale or hire, screening in private homes and mailing by Australia Post so as to include the total prohibition of any pornographic, obscene or blasphemous video cassette, or film containing child pornography, bestiality, sodomy, group sex, violent sex acts with women, such as rape and pack rape, sadism and torture, etc. Your petitioners therefore humbly pray that your Honourable House will protect our society, especially women and children from moral pollution and its harmful effects. And your petitioners as in duty bound will ever pray. by Senators Brownhill (from 24 citizens) and Robertson (from 21 citizens). To the Honourable the President and members of the Senate in Parliament House assembled. The Petition of the undersigned citizens of Australia respectfully showeth that the Australian Labor Party: `is committed to the elimination of nuclear weapons and the ultimate achievement of general and complete disarmament ' (ALP Platform 1984, 12E); and will: `promote the development of zones of peace and nuclear free zones in the Indian and Pacific Oceans' (ALP Platform 1984, 12E.34); `oppose the development and acquisition of nuclear, chemical, bacteriological or other weapons of mass destruction for Australia's Armed Forces; nor permit any foreign government to station such weapons on Australian soil' (ALP Platform 1984, 12F.41); and `oppose the storage of nuclear weapons on Australian territory and the staging of operations involving nuclear weapons from Australian territory' ALP Platform 1984, 12F.48). Your petitioners therefore humbly pray that all Federal representatives of the Labor Government, and Federal representatives of all other political parties including independents, vote for Senator Chipp's Nuclear Weapons Prohibitions Bill 1984, the passage of which would effectively make Australia a nuclear weapons free zone and would leave no doubt as to the present Governments's stated commitment to disarmament. And your petitioners as in duty bound will ever pray. by Senator Chipp (from 22 citizens). To the Honourable the President and members of the Senate in Parliament House assembled. The petition of the undersigned citizens of Australia respectfully showeth that we support the following Bills introduced by Senator Chipp: Australian Airspace (Nuclear Weapons Prohibition) Bill 1985 Australian Waters (Nuclear-Powered Ships Prohibition) Bill 1985 Australian Waters (Nuclear Weapons Prohibition) Bill 1985 the passage of which would prohibit the entry of aircraft carrying nuclear weapons into Australian airspace, the entry of nuclear powered and/or armed ships into Australian waters, and the development, testing, manufacturing, transportation or storage of nuclear weapons in Australia. Your petitioners therefore humbly pray that all Senators, regardless of political affiliations, support these Bills-not just for our sake but for our children. And your petitioners as in duty bound will ever pray. by Senator Chipp (from 60 citizens). To the Honourable the President and members of the Senate in Parliament assembled: the humble petition of the undersigned citizens of Australia respectfully showeth: That we deplore the discriminatory tax proposals as outlined in the Government's `White Paper' and the Government's preferred option on proposed new and widened tax proposals as so outlined, namely: Capital Gains Tax Hidden Death Tax described as `Capital Gains Tax after death' Gift Tax Increased Company Tax Employer taxes on employees' employment benefits All such taxes will discriminate against and inhibit progress, growth and employment throughout the nation. They will attack hardworking people who have built up their assets; they will discourage thrift; they will inhibit development; they will treat unfairly all who plan for the future; they will cause trouble and expense in arriving at the value of their assets; they will discourage industry and punish achievement. Your Petitioners therefore humbly pray that the Senate in Parliament assembled should reject these tax proposals. And your Petitioners as in duty bound will ever pray. by Senators Brownhill (from 48 citizens) and Sheil (from 118 citizens). To the Honourable the President and members of the Senate in Parliament assembled. The petition of the undersigned Australian citizens respectfully showeth: That human embryos deserve legal protection to enable the development of their full human potential. Your petitioners humbly pray that the Senate pass Senator Harradine's Bill to prohibit experiments involving the use of human embryos. And your petitioners as in duty bound will ever pray. by Senator Sir John Carrick (from 48 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 Sentor Harradine's Bill to prohibit experiments involving the use of human embryos created by in vitro fertilisation. And your petitioners as in duty bound will ever pray. by Senators Knowles (from 298 citizens) and Robertson (from 647 citizens). To the Honourable the President and members of the Senate in Parliament. The undersigned are convinced that an alliance, including full military co-operation, between Australia and the United States is indispensible to the defence security of the Australian Commonwealth; that every alliance involves co-operative arrangements of a practical nature; and that the following arrangements are indespensible to the effective conduct of ANZUS and any similar agreement, to wit: the reception of US naval shipping (nuclear and non-nuclear) in Australian ports; the maintenance of the present US nuclear installations in Australia; reasonable co-operation by Australia in U.S. missile testing programmes. Your petitioners, therefore, pray the Senate, in Parliament assembled, that you will give this matter your earnest consideration, and your petitioners, as in duty bound, will ever pray. by Senator Collard (from 11 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 Senators Knowles (from 84 citizens) and Robertson (from 29 citizens). 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, coprohyilia, 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 the Senate, in Parliament assembled that you will give this matter earnest consideration and your petitioners, as in duty bound, will ever pray. by Senator Robertson (from 288 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 benefits to veterans and war widows, and which seek to change the onus of proof and the assessment of T.P.I. And your petitioners as in duty bound will ever pray. by Senators Macklin (from 105 citizens) and Sanders (from 25 citizens). To the Honourable the President and members of the Senate in Parliament assembled. The petition of the undersigned respectfully showeth: Every citizen should have- 1. A constitutional guarantee of the right to vote. 2. A constitutional guarantee of the equality of votes. Your petitioners most humbly pray that the Senate in Parliament assembled, should support the Constitution Alteration (Democratic Elections) 1985 Bill. And your petitioners as in duty bound will ever pray. by Senator Macklin (from 18 citizens). To the Honourable the President and members of the Senate in Parliament assembled. Victorian Planning (Brothels) Act 1984 The Petition of the undersigned citizens of Australia respectfully showeth: That whereas the Commonwealth of Australia ratified the UN Convention on the Elimination of All Forms of Discrimination Against Women in 1983, the Government of Victoria in passing the Planning (Brothels) Act 1984 is in breach of Article 6 of the Convention which says that ``States Parties shall take all appropriate measures, including legislation, to supress all forms of traffic in women and exploitation of prostitution of women''. That the Victorian Planning (Brothels) Act 1984 provides legal authority to brothel operators to traffic in and exploit the prostitution of women and to live off the earnings of prostitutes. That whereas the Federal Minister for Health has counselled citizens to shun promiscuity (The Australian 26/1/85) because of the serious and sometimes fatal health hazards, the operations of legalised brothels encourages promiscuity and the spread of diseases, including AIDS. Your petitioners therefore pray: That the Government of Australia having ratified the UN Convention on Women remain consistent in its obligations to uphold the Articles of the Convention and request the Victorian Government to immediately repeal the Planning (Brothels) Act 1984. And your petitioners, as in duty bound, will ever pray. by Senators Button (from 517 citizens), Chipp (from 507 citizens), Hamer (from 442 citizens), Lewis (from 392 citizens), Robert Ray (from 659 citizens) and Robertson (from 370 citizens). To the Honourable the President and the members of the Senate in Parliament assembled: The petition of certain citizens of Australia shows that Woodchipping and Clearfelling will destroy the Otway Forests, water catchments and jobs in tourism. Your petitioners therefore pray that you will protect the Otway Forests for the future and refuse any licence to export woodchips from the Otways. by Senator Sanders (from 25 citizens). To the Honourable the President and members of the Senate in Parliament assembled. We the undersigned citizens of Coffs Harbour/ Raleigh and employees of Norco Co-op Ltd. do respectfully pray that the 10 per cent sales tax on ice cream be removed forthwith-for the following reasons: That the Government has failed to consider the jobs (some of us will be vulnerable) which will inevitably be lost as a result of consumer resistance to higher prices. That the Government has ignored the damaging effects on two already hard-pressed industries: dairying (source material valued at $46 million a year) and sugar ($14 million). That the Government has grossly underestimated the cost to thousands of low income families of higher ice cream prices as a result of the tax. That the Government cannot justify taxing ice cream which is regarded by all authorities as an important, nutritous food and which is a key product in the Consumer Price Index. We request that the Senate, in Parliament assembled, will amend the Sales Tax (Exemptions and Classifications) Amendment Bill 1985 in such a manner as to remove the sales tax on ice cream. Your petitioners, as in duty bound, will ever pray. by Senator Brownhill (from 376 citizens). To the Honourable the President and members of the Senate in Parliament assembled. We the undersigned citizens of Murwillumbah and employees of Norco Co-op Ltd. do respectfully pray that the 10 per cent sales tax on ice cream be removed forthwith-for the following reasons: That the Government has failed to consider the jobs (some of us will be vulnerable) which will inevitably be lost as a result of consumer resistance to higher prices. That the Government has ignored the damaging effects on two already hard-pressed industries: dairying (source material valued at $46 million a year) and sugar ($14 million). That the Government has grossly underestimated the cost to thousands of low income families of higher ice cream prices as a result of the tax. That the Government cannot justify taxing ice cream which is regarded by all authorities as an important, nutritous food and which is a key product in the Consumer Price Index. We request that the Senate, in Parliament assembled, will amend the Sales Tax (Exemptions and Classifications) Amendment Bill 1985 in such a manner as to remove the sales tax on ice cream. Your petitioners, as in duty bound, will ever pray. by Senator Puplick (from 233 citizens). To the Honourable the President and members of the Senate in the Parliament assembled. The petition of the undersigned citizens of Australia respectfully showeth that: Whereas the Australian Government have stated that they wish to develop the orderly service of the Citizens Band Radio Service Your petitioners therefore humbly pray: That we, the undersigned, are deeply concerned that Australia's Citizen Band Radio Services are being disrupted by illegal interference. This interference is intentional on the CBRS UHF band and is causing major disruption to the orderly service of that band by people blocking the repeater services by dropping carriers and the playing of music and using offensive language. This also causes the repeaters in the UHF CBRS to ``time out'', thereby making them useless to other legitimate users. On the 27 Mhz band of the CBRS, continued and increased use of the spectrum by Industrial, Scientific and Medical operation is making voice communication on the band impossible. Demarkation of transmission modes is necessary for efficient use. The undersigned humbly petition the Parliament of Australia, its States and Territories, to take all measures within their powers to reduce the interference level on the CBRS to allow orderly development of the Service to continue, there-by allowing all operators to benefit by its use. Your petitioners as in duty bound will ever pray. by Senator Puplick (from 159 citizens). To the Honourable the President and members of the Senate in Parliament assembled. The humble petition of the undersigned citizens respectfully showeth: That the phasing out of the recurrent grant to residential colleges is detrimental to the ability of disadvantaged and country students to receive a tertiary education. That alternative arrangements to fund needy students are of no net benefit to those students, owing to the higher costs of administering such arrangements. Your petitioners therefore humbly pray that the recurrent grant to residential colleges be reinstated as the most efficient and equitable means of ensuring that all citizens, irrespective of background, have equal opportunity to receive a tertiary education. And your petitioners as in duty bound will ever pray. by Senator Crichton-Browne (from 96 citizens). To the Honourable the President and members of the Senate in Parliament assembled: The petition of the undersigned respectfully showeth: But for a High Court decision narrowly favouring the Federal Government, recently discovered 20,000 years old archaeological cave sites near the Franklin River Tasmania, equal in importance to those in the Vesere Valley in France, would have been destroyed, like a United Kingdom Government unable to stop a Wiltshire authority from clearing Stonehenge for a freeway. The constitutional basis for protecting historical and environmental assets remains weak. Your petitioners therefore most humbly pray that the Senate in Parliament assembled should request the Government to hold a referendum to amend the constitution so that: The Federal Government has the duty and a right superior to state and local governments to set above the commercial advantage of one generation, protect and restore, those things we hold in trust for the future- Being relics, sites, features, areas, wildlife, buildings or things of Aboriginal and other historical, cultural, scientific, aesthetic, ecological or environmental importance; To care for the maintenance of the balance of nature, manage land, marine and atmospheric use so as to avoid their degradation and act in any other matter seen to be in the same spirit; To prevent beach and related mining, military and commercial use of uranium; to preserve Heritage Areas, The Great Barrier Reef region at least as originally defined in the 1975 Act and extended into Torres Strait. And your petitioners, as in duty bound, will ever pray. by Senator Sanders (from eight citizens). To the Honourable the President and members of the Senate in Parliament. We the undersigned express our concern over the sale of the Belconnen Mall due to the likely detrimental effect on the provision of community facilities presently existing in the Belconnen Mall. 1. In particular we seek guarantees that the present Child Care Centre and Community Facilities be retained by incorporating the same into the conditions of sale of the Belconnen Mall and that the Services will receive the same real level of funding and support currently provided by the Canberra Commercial Development Authority. 2. That a financial commitment to the Building of Stage 4 of the Belconnen Mall listed under Section 14C in the Ordinance of the Canberra Commercial Development Authority be undertaken. Stage 4 to consist of Community Facilities such as Community Hall, large glassed enclosed community park, exhibition space, health and fitness club, ice rink, amusement centre and office accommodation. Your petitioners therefore humbly pray that this petition be considered. by Senator Vigor (from 857 citizens). Petitions received. Senator LEWIS —(Victoria)-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 Postal Services Act 1975. Senator JONES(Queensland) —I give notice that, on the next day of sitting, I shall move: That the Senate- (a) views with contempt the flagrant and cynical destruction of democracy in the State of Queensland, brought about by the blatant gerrymandering of electoral boundaries proposed by the Queensland Government in its redistribution plans; and (b) notes that under these plans the National Party can expect to retain office with some 35 per cent of the vote, a situation that cannot be tolerated in a country such as Australia that aspires to the total expression of the democratic process. Senator BROWNHILL(New South Wales) —I give notice that, on the next day of sitting, I shall move- That the Senate- (a) notes with concern the recent estimate from the Bureau of Agricultural Economics that profitability in the rural sector will this financial year slump by 26 per cent; (b) notes that the Australian Conciliation and Arbitration Commission has granted farm workers a 2.6 per cent wage rise, which has subsequently been followed by a 3.8 per cent national wage rise, which will mean an additional cost of $65m-$70m, or a loss of an estimated 5,800 jobs in the rural sector alone; and (c) calls on the Federal Government to realise their failure in the economic management of Australia and address itself to real attempts to reduce the deficit, and introduce policies that will bring the crippling interest rates being paid down to a realistic and affordable level, before all incentive for business is lost. Senator MASON(New South Wales) —I give notice that, contingent upon the President proceeding to the placing of business on any day, I shall move: That so much of the Standing Orders be suspended as would prevent Senator Mason moving a motion to give precedence over all other business to the Order of the Day relating to the Commission of Inquiry (Chamberlain Convictions) Bill 1984 [1985]. Mr President, I seek leave to make a brief statement on this matter. Leave granted. Senator MASON —I believe I am not alone among honourable senators and indeed members of the House of Representatives in my degree of concern at the continued failure of the Northern Territory Government to institute a comission of inquiry into the three major areas of new evidence which have been available for some time in the Chamberlain case. The evidence was put forward in the clearest and fullest form by the Chamberlain Innocence Committee, of which I am a member, to the Northern Territory Government some five months ago. This is not the time or the place to discuss those areas of evidence other than to say that there was and is nothing in them that should take five months to decide whether or not they should be investigated in a proper and public judicial setting. In a poll just carried out in the Northern Territory by the Northern Territory News-- Senator Gareth Evans-Mr President, I raise a point of order. Leave was granted to Senator Mason on the basis that he would give a brief explanation presumably as to why he is giving the notice of motion, not in order that he may embark upon a substantive debate of the issues and endeavour to persuade us to adopt his substantive recommendation. That is something that can happen later on. Senator MASON —Mr President, may I speak to the point of order? The PRESIDENT —Order! The honourable senator was given leave to make a brief statement. I suggest that the honourable senator should not be raising matters in that brief statement that relate to any debate on a Bill that he has before the House. I call Senator Mason. Senator MASON —Mr President, may I speak to the point of order? The PRESIDENT —Certainly. Senator MASON —I believe I was given leave to make a statement on this matter. The PRESIDENT —The honourable senator was given leave to make a brief statement, as I understand it, on a contingent notice of motion. Does the honourable senator wish to continue to make a brief statement on the contingent notice. Senator MASON —Indeed I do, Mr President. The PRESIDENT —I call Senator Mason. Senator MASON —Few people in Australia can be unaware now that a very wide and distinguished area of legal opinion believes that on the evidence, as it now stands, the Chamberlains ought to be considered innocent, and that every day Mrs Chamberlain spends in prison is an indictment of our legal system and, beyond that, our society. I do not press that view on honourable senators at this stage-- The PRESIDENT —Order! The honourable senator was given leave to make a brief statement on a contigent notice of motion. I suggest that he is now making a statement in regard to a Bill of which he has given notice before the Senate and that, clearly, the statement is out of order. Senator TOWNLEY(Tasmania) —I give notice that, on the next day of sitting, I shall move: That the Senate- (a) recognising that housing is one of the most important sectors of the economy; (b) being fully aware of the extreme housing shortage that is developing within Australia, and the consequent high rents that are being charged; (c) convinced that a capital gains tax will cause people to buy expensive houses, when they can afford a house at all; and (d) gravely concerned that today's falling dollar and high consequent interest rates will make the chances of anyone being able to afford to build a new house quite remote, calls upon the Government to abandon the idea of a capital gains tax and to take immediate action to show the world that it is seriously attempting to control Government spending, and so reduce the massive deficit which is one of the main factors leading to the damaging high interest rates in Australia. Senator MISSEN(Victoria) —by leave-I move: That the notice of motion given by me to disallow the Freedom of Information (Miscellaneous Provisions) Regulations (Amendment) contained in Statutory Rules 1985 No. 106 be withdrawn. I am not withdrawing the second notice of motion listed on the Notice Paper, which I understand is subject to application by the Leader of the Opposition, Senator Chaney, and may be postponed. That notice is not being withdrawn. I am merely withdrawing a notice of motion which appears by error on the Notice Paper. Motion (by Senator Gareth Evans)-by leave-agreed to: That leave be given to introduce a Bill for an Act relating to the Australian Nuclear Science and Technology Organisation, and for other purposes. That leave be given to introduce a Bill for an Act to enact certain transitional provisions in consequence of the enactment of the Australian Nuclear Science and Technology Organisation Act 1985. That leave be given to introduce a Bill for an Act to amend the Atomic Energy Act 1953. Motion (by Senator Gareth Evans) agreed to: That so much of the Standing Orders be suspended as would prevent the questions with regard to the several stages for the passage through the Senate of all or several of the Bills being put in one motion at each stage and the consideration of all or several of such Bills together in the Committee of the Whole. Ordered that the Bills may be taken through all their stages without delay. Bills (on motion by Senator Gareth Evans) read a first time. Second Readings Senator GARETH EVANS(Victoria-Minister for Resources and Energy)(10.14) —I move: That the Bills be now read a second time. This legislation replaces the Australian Atomic Energy Commission with a new organisation to be known as the Australian Nuclear Science and Technology Organisation, or ANSTO, and repeals the draconian provisions of the Atomic Energy Act 1953. AUSTRALIAN NUCLEAR SCIENCE AND TECHNOLOGY ORGANISATION The Atomic Energy Act gave the Atomic Energy Commission the role of an active participant in the development of all phases of the peaceful uses of atomic energy, including the exploitation of Australia's uranium resources and the eventual introduction of nuclear power into this country. With the rapid development of Australia's major fossil fuel resources, it became increasingly apparent in the 1970s that there would be no need for the introduction of nuclear power into this country in any foreseeable future and, consequently, research at the AAEC in this area was curtailed. In recent years the AAEC has ceased its involvement in the uranium mining industry, and the uranium enrichment research based on centrifuge technology, which has been undertaken by the Commission since the mid-1960s, is also soon to be terminated. I note that my predecessor in this portfolio, Senator Walsh, agreed that, in phasing down its enrichment program, the Commission, in conjunction with the Australian Safeguards Office, could complete a project on the application of safeguarding techniques to centrifuge equipment. This project is part of Australia's program of assistance to the International Atomic Energy Agency. While moving away from nuclear fuel cycle activities, in line with the Government's policy, which is that Australia not become involved in any stages of the nuclear fuel cycle other than the mining and milling of Uranium and the disposal of waste, the Atomic Energy Commission has continued to apply its substantial expertise to research activities into the uses of radio-isotopes and radiation. However, the Commission's research program has been without firm legislative directions for the future. This new legislation will provide the direction needed to ensure Australia is able to take full advantage of the many benefits and to be derived from the peaceful application of nuclear science and technology. The creation of ANSTO will be more than just a superficial change of name for the AAEC. The Government proposes to use the opportunity to rationalise the nuclear research and development programs of Australia's principal nuclear research establishment. The Government recognises that nuclear technology, when applied to areas such as medicine, science, industry and agriculture, can make an important contribution to the social and economic well-being of Australia and accordingly these are the areas in which ANSTO will focus its activities. The Atomic Energy Commission has already made a major contribution to the development of nuclear medicine in Australia and currently supplies more than 50 hospitals with a wide range of radio-pharmaceuticals. The medical radio-isotopes supplied represent a total of about 100,000 patient doses per year. The Government believes that ANSTO will be able to build on the Commission's success in the nuclear medicine field by strengthening its research and commercial activities in the other areas I have just mentioned. The Government will encourage ANSTO to increase its commercial or cost recovery orientation, along the lines of the United Kingdom Atomic Energy Authority's Research Establishment at Harwell. Of course, the Government recognises that the Organisation will be unlikely to achieve the same level of self-sufficiency for all commercial activities as Harwell, given the much larger industrial base in the United Kingdom. However, to promote progress towards this goal, it is proposed that ANSTO will retain its commercial revenue, subject to the agreement of the responsible Minister and the Minister for Finance. It is also proposed that subject to specific ministerial approval, the organisation may undertake non-nuclear research, where this would make efficient use of its facilities and provided such research does not duplicate work undertaken by other Commonwealth bodies. In the past it has been suggested that the Atomic Energy Commission has undertaken research directed at nuclear weapons development, despite repeated denials by both the Commission and responsible Ministers, including myself. Of course, nuclear weapons development and related research is specifically prohibited by the Treaty on the Non-Proliferation of Nuclear Weapons, which Australia joined in 1973. However, to make it absolutely clear that ANSTO's activities will be directed solely to the peaceful uses of nuclear technology, the proposed legislation will prohibit ANSTO from undertaking any research or development into the design or production of nuclear weapons or other explosive devices. An area where the Atomic Energy Commission has been subject to criticism in recent years is in relation to the safety of operation of its facilities. Much of this criticism has centred upon the Commission being self-regulating, in that the Regulatory Bureau's Director has reported to the Commission, whose membership includes the Chief Executive of the Research Establishment. The Atomic Energy Commission has had an excellent safety record to date and I have no reason to believe this will not continue to be the case. However, in recognition of the criticism about self-regulation, a Nuclear Safety Bureau will be established which will be directly responsible to the Minister for monitoring and reviewing the nuclear safety of any nuclear plant operated by the Organisation. The structural arrangements proposed for ANSTO are intended to draw on a wide range of expertise external to the Organisation. It is proposed that ANSTO be governed by an Executive of up to seven members, a majority of whom will be required to be drawn from outside the Organisation. To ensure that a broad spectrum of views will be available to the Minister and the Executive, an advisory council of up to 11 members will be created. The majority of council members will be drawn from outside the Organisation, including representatives of ANSTO user groups. The Council will also include at least one staff elected representative. The Minister will be able to establish specialist advisory committees considered necessary to advise the Executive of the organisation on particular matters. For example, I would expect the Safety Review Committee established by the Commission to review independently health and safety matters of significance to staff and the public to be re-established under ANSTO. The Joint Consultative Committee, a forum for consultation between management and staff, will also be given legislative recognition consistent with the Government's industrial democracy objectives. ATOMIC ENERGY ACT AMENDMENT The Atomic Energy Act was originally drafted in the political climate of the Cold War. At that time uranium was considered to be a scarce resource of major strategic importance as well as a potential future energy source for Australia. The Atomic Energy Act was therefore framed with the intention of using Australia's uranium resources as a lever to gain access to the emerging body of nuclear knowledge and expertise available overseas. It was also contemplated that uranium might be exploited for defence purposes. Section 17 of the Atomic Energy Act provides that the functions of the AAEC `should be performed only for the purpose of', among other things, `ensuring the provision of uranium or atomic energy for the defence of the Commonwealth'. Against this background, repressive security and penal provisions were included in the Act. For example, section 48 places a general prohibition on any communication of `restricted information', whatever the intent of the communicator. The penalty provided is seven years gaol. `Restricted information' is defined in such a way that it would include almost any unpublished information one can think of in relation to a uranium mine, including information on the environmental or safety impact of production methods. Needless to say, these provisions quickly became irrelevant to the activities of the AAEC. Their repeal will remove from the statute book an offensive anachronism. The Government has been particularly concerned at the potential of these provisions to threaten the civil liberties of Australian citizens. All of the excessive security provisions and penalties, including those applying to the communication of restricted information, sabotage and the search and arrest of suspected persons, will cease to exist. No longer will offences which are dealt with in other contexts by recourse to the general law be singled out as they were under the Atomic Energy Act for specific and excessive penalties. Nor will it be possible to apply the provisions of the Approved Defence Projects Protection Act 1947 to nuclear research and development activities. TRANSITIONAL PROVISIONS To ensure a smooth transition from the AAEC to ANSTO, the Australian Nuclear Science and Technology Organisation (Transitional Provisions) Bill provides for transfer of the property, staff, power, rights, estimates of expenditure, liabilities and obligations of the AAEC to ANSTO. Senator Sanders —Including the nuclear waste at Lucas Heights? Will it take that over too? Senator GARETH EVANS —Indeed it will. Senator Sanders —Safely? Senator GARETH EVANS —We hope so. Senator Sanders —I hope so too. Senator GARETH EVANS —Bless you. FINANCIAL IMPACT As ANSTO will take over the existing staff, assets, liabilities and financial estimates of the Australian Atomic Energy Commission, there is not expected to be any significant financial impact from enactment of this legislation in the short term. In the longer term it is anticipated the Organisation will become increasingly commercially oriented in the services provided, and revenue receipts should increase accordingly. NUCLEAR NON-PROLIFERATION SAFEGUARDS In addition to establishing an Australian Nuclear Science and Technology Organisation consistent with the Hawke Government's policy on nuclear research activities, I foreshadow my intention to introduce further nuclear legislation, namely a Nuclear Non-Proliferation (Safeguards) Bill, to reinforce the Government's strong committment to nuclear non-proliferation and safeguards. This Bill will be aimed at giving domestic legislative effect to Australia's international non-proliferation obligations and providing a legislative basis for the operations of the Australian Safeguards Office. The Bill will establish controls over the possession and transport of nuclear materials, equipment and technology by a system of permits to be issued by the Minister. The permits will impose strict conditions governing such matters as the use, transfer, location and physical security of the nuclear material or item and accounting and reporting requirements in relation to such material or item. The system will be administered by the Australian Safeguards Office which will be given the necessary powers to ensure the effective operation of the system. I hope the Bill will be available for introduction later in this session of Parliament. CONCLUSION I believe these three Bills now before Parliament will establish a viable basis for the conduct of nuclear research in this country and will ensure that in future the direction and purpose of this research will reflect Government policy and will be relevant to the needs of the Australian community. The Government proposes to let the Bills lie on the table until the autumn sittings next year. This will enable detailed consideration of the Bills by the community before they are debated in detail in the Parliament. I commend the Bills to the Senate. Debate (on motion by Senator Chaney) adjourned. Motion (by Senator Gareth Evans) agreed to: That leave be given to introduce a Bill for an Act to amend the Petroleum (Submerged Lands) Act 1967 to provide for the granting of exploration permits by way of cash bidding, and for related purposes. Bill presented by Senator Gareth Evans, and read a first time. Standing Orders suspended. Senator GARETH EVANS(Victoria-Minister for Resources and Energy)(10.25) —I move: That the Bill be now read a second time. This Bill proposes the amendment of the Petroleum (Submerged Lands) Act 1967 to provide for a cash bidding system for the award of petroleum exploration permits in highly prospective off-shore areas. The Government is reintroducing this Bill following further extensive examination of the alternatives to cash bidding and, in particular, attempts to identify suitable modifications to the traditional work program bidding system. The end result of this evaluation, reinforced by industry's response to proposed modifications to the work program system, has been to confirm the Government's view that, where competition is expected to be high, the cash bidding system is the most efficient and equitable means of awarding petroleum exploration and exploitation rights. As other countries and explorers in those countries have demonstrated, to their mutual benefit, the cash bidding system not only allows the industry to determine the amount the community should receive for the granting of these rights, but also represents a self-contained selection process. The system allows the explorer to determine and carry out an exploration strategy in the light of the commercial realities of the day, free from unnecessary government regulation. By contrast, in highly prospective areas, the present work program system-and various proposals for modification to the system that have been put forward by the industry and others-involve what I believe to be an excessive degree of regulation. This regulation does little to incourage exploration activity. In fact, it seems to imply that industry will do nothing unless forced to by the legal requirements of the permits issued by the Government. I would have thought that industry would be keen to see the removal of this form of government regulation and its replacement with a system which enables companies to operate strictly on the basis of commercial judgments. However, as we have seen on previous occasions, industry frequently prefers to operate in the relative comfort of a government regulated environment. The Government has major reservations about increasing government regulation, particularly when there are better options available which would involve far less government regulation in the day to day activities of the industry. Many of these day to day decisions are best made by explorers in the light of economic and technical circumstances at the time. In many cases government involvement promotes uncertainty, delays and unnecessary conflict between government and industry. I believe government should be setting the broad parameters in this area of off-shore petroleum activity and then letting companies get on with the job of exploration and development. While I and other members of the Government have on a number of occasions this year put on record the rationale for cash bidding-a rationale that has never seriously been challenged-I believe those arguments bear repeating now. I urge the Opposition to reconsider its position and hope that it will, on reflection, recognise the efficacy of the cash bidding system contained in the Bill. Mr Acting Deputy President, I seek leave to have the remainder of the speech incorporated in Hansard. Leave granted. The remainder of the speech read as follows- The trigger for introducing the cash bidding system has been the significant shortcomings of the work program bidding system where there is high competition for exploration permits. In these circumstances, the work program system first encourages companies to propose substantial exploration programs that may later prove to be uneconomic either because of changes in economic conditions or a downgrading in prospectivity following initial exploration: Secondly, it forces the Government, where a work program becomes uneconomic, either to agree to exemptions from parts of the work program, which undermines the credibility of the system and is inequitable to unsuccessful bidders, or to require the permittee to undertake the uneconomic exploration under threat of cancellation of the permit: Neither course is in the long term interest of the exploration industry: Thirdly, it requires a subjective selection of the winning bid where competition is high, as no amount of technical advice can differentiate readily between work programs of a similar character and size; nor can that advice predict whether the work program will actually be completed by the applicant: Fourthly, it is costly and complex to administer, as work programs must be verified throughout the life of the permit in order to maintain the credibility of the system. Recent experience in the Gippsland Basin illustrates these difficulties. Applications were invited in 1980 for three permits for highly prospective areas, attracting 29 bidders overall with more than eight for each permit. Most bidders proposed large work programs, but a whole variety of different exploration philosophies were involved, and acute difficulties were experienced in choosing between them even after careful evaluation of the technical aspects of the proposals and detailed discussions with the applicants. In the end, after all this effort, there is no evidence that the Government got it right: One permit was surrendered after only four wells were drilled from a commitment of 12 wells, another is being surrendered after only seven wells have been completed from an original program of 19 wells, and the third permittee has deferred some commitments and applied for a reduced program. There is every indication that the same circumstances may be repeated if the work program bidding system is applied to the award of highly prospective acreage in the Timor Sea region. Following rejection of the cash bidding legislation by the Senate I proposed a number of modifications to the work program bidding system aimed, to the extent that this is possible, at overcoming its major deficiencies. In summary these proposed modifications, which reflected many of the suggestions industry made earlier in the year, would require applicants to identify minimum guaranteed `dry hole' exploration programs and separate `supplementary' work programs tied to the outcome of the initial exploration. Where a winning application cannot be determined on the basis of the minimum guaranteed `dry hole' program a number of discretionary criteria would be used to differentiate between applications. The proposed discretionary criteria would involve consideration of competing applications on the basis of the level of Australian involvement, whether new explorers are being introduced to the Australian off-shore area, past performance and commitments to source goods and services in Australia, past performance and commitments to undertake research in Australia, and demonstrated willingness to explore in `frontier' areas. While I believe modifications along these lines would improve the work program system, particularly in its application to less competitive areas, they do nonetheless in several respects lead the Government in a direction quite contrary to that which we-and, I would have thought, the Opposition-would prefer. It is clear that the modified system would significantly increase government regulation of the industry, with no certainty that this regulation would overcome the economic efficiency and equity problems. The need for extensive discretionary criteria in the assessment of applications-a need recognised and in fact proposed by industry-is also at odds with the principles promoted by Parliament through, for example, the Senate Standing Committee for the Scrutiny of Bills. In short, the inherent weakness of work program bidding systems when used in highly competitive situations cannot be satisfactorily overcome. The efforts in devising a modified system have simply reinforced the Government's views about the economic efficiency, equity and administrative simplicity arguments in support of cash bidding. Accordingly, the release of the more prospective areas in the territory of Ashmore and Cartier Islands adjacent area which were identified earlier this year-the release of which has been held up first by the defeat of this Bill earlier this year and then by the search for an adequate alternative work program system-will be made as soon as possible after this Bill receives the royal assent. What cash bidding will do is give explorers the opportunity to adopt the optimum and most economically efficient exploration philosophy based on progressive acquisition of information about the permit areas. Commercial judgments can be made about the appropriate level of exploration at any given time, without the heavy, albeit well intentioned, hand of government regulation intruding. When calling applications for the award of an exploration permit under the cash bidding system, the Joint Authority will specify the period within which an application must be made, the availability of a renewal option for the permit, summary details of the conditions of the permit, and the matters to be taken into account in selecting the winning bid. Applicants will be required to apply for a permit over all the blocks on offer for each specified area. In their applications, bidders will be required to specify the amount they are willing to pay for the award of the permit. Further, the application will be required to contain details of the technical and financial resources available to the applicant to undertake exploration in the permit, and information on any other matters that the applicant wishes to be considered. The permits will not be subject to an exploration work program commitment. A fee of $3,000, of which 90 per cent will be refunded if the application is unsuccessful, will be payable on lodging the application. No reserve prices will be set for permit areas, but the Joint Authority will have the right to reject bids if they are considered inadequate on account of insufficient competition or if there is evidence of collusive bidding. Bids may also be rejected if the bidder is considered to lack the technical competence or financial resources necessary to undertake successfully complex off-shore exploration. This right to reject bids is available to the Joint Authority under the work program system. However, unlike the work program system, the cash bidding system requires the Joint Authority to specify these matters at the time applications are called. In this way bidders will be fully aware of all the conditions relevant to the selection of the winning bid. If, after assessment of all the bidders, only one bid remains, the permit will be offered to that consortium. If two or more bids remain, the permit will be offered to the applicant making the highest bid. In order to provide maximum flexibility to bidders, there is no obligation on the winning bidder to accept the offer of a permit. Not only would it be impracticable to force consortia to accept offers of a permit, but in attempting to do so competition would be restricted. I note that a similar provision also applies under the work program system. If the highest bidder rejects the offer, the permit will be offered to the next highest bidder and so on. Once a consortium has accepted an offer of a permit and paid the amount bid, the permit will be awarded to that consortium as soon as is practicable which, unless there are some unforeseen circumstances, would generally be within one month. To ensure there is a clear incentive to undertake exploration in the permits and to discourage speculators from `sterilising' the acreage, only a limited renewal option will be available for cash bid permits. All cash bidding permits will be available for an initial six-year period and, where the Joint Authority considers that the permit is sufficiently large, the avail- ability of a single five-year renewal option for up to 50 per cent of the permit area will be announced at the time applications are invited for the acreage. However, given that cash bidding permits will cover very small areas in comparison with work program bidding areas, extended periods beyond the initial six-year term and one five-year renewal will not be necessary to explore the areas. There are already ample opportunities for a permittee to retain tenure over a discovery even after the permit has expired. The introduction of retention leases in separate legislation earlier this year provides an additional avenue for retaining tenure over any discoveries that cannot be immediately developed. Permittees will, of course, be required to meet all other conditions normal for permit such as any special environmental conditions and the compliance with the directions issued by the Joint Authority which deal, for example, with the manner in which any activities must be undertaken. Summary details of these conditions will be made known at the time applications are called. Cash bidding is to be used initially in areas solely administered by the Commonwealth. Extension to off-shore areas adjacent to the States and the Northern Territory is to await the outcome of a review of the system after a two-year trial period in the Territory of Ashmore and Cartier Islands Adjacent Area. The legislation provides that the Joint Authority, which consists of the Commonwealth Minister and the relevant State and Northern Territory Minister, must make decisions on which areas are to be released under the cash bidding system. Not only will consultation take place through the Joint Authority process; the Government also intends that there will be separate discussions which will take account of the sharing of revenue derived from cash bids. Accordingly, there are no revenue sharing provisions contained in this Bill. The States and Northern Territory are already aware that cash bidding revenue sharing will be addressed in the context of discussions on sharing of resource rent tax revenue. As I indicated earlier, I believe it is worth while to address once again the unsubstantiated claims and criticisms that have been made against cash bidding. These are that cash bidding will reduce the amount of money available for exploration, that it will increase the costs and risks of exploration, that small to medium size Australian companies will be disadvantaged and that it is inconsistent with RRT. First is the argument that cash bidding will reduce the funds available for exploration. The assumption underlying this argument is that the funds available for exploration are fixed-that the Australian exploration industry is a `closed shop' within which a given amount of funds circulate, without either escaping or being topped up. There is no evidence to suggest this is the case. In deciding to bid for a particular permit, a company will design an exploration program that enables it to assess properly the petroleum potential and to estimate the expected return on investment in that program. The extent to which the estimated return from the program exceeds the company's required return will determine the size of the cash bid. If no excess returns are expected, the company will not bid. Similarly, the payment of a cash bid will not reduce activity in other exploration areas. Certainly companies may need to rearrange their investment priorities in a normal commercial decision-making manner. This, however, will not result in companies neglecting the evaluation of petroleum prospects which are expected to be profitable. Obviously, the most profitable prospects, which are likely to be in cash bid areas, will be explored first-but there is nothing wrong, from the point of view of the national interest or anything else, with exploration taking place in more prospective areas first. The decision to acquire a permit by way of cash bidding is essentially similar to a decision to acquire an interest in a permit by way of farm-in. When an exploration company decides to pay a premium by way of farm-in, its concern is that the permit, and other permits in which the company has an interest, are explored in a way which is consistent with the commercial realities of the day. Further, it is of no concern to the company what happens to the premium it has paid-whether it remains in the Australian exploration industry or not. A clear example of the cash bidding/farm-in analogy is provided by a farm-in arrangement completed earlier this year, in which an Australian company decided within 30 days to pay tens of millions of dollars to a foreign company for the latter's interest in an attractive permit. The Australian company's exploration budget was unaffected and the foreign company has no current intention to invest the funds in exploration in Australia. Farm-ins are an essential feature of the exploration industry. There is no suggestion that they result in reduced exploration nor can it be sustained that cash bidding will result in reduced exploration. Rather than reducing funds, there is every prospect that the net effect of the introduction of cash bidding may be to add substantially to the pool of investment funds available for exploration in the medium term. It appears that a number of overseas companies with no previous experience in Australia, which have been very reluctant hitherto to compete against those with local knowledge and experience in work program bidding, have now expressed an inclination to participate in cash bidding, where they see their lack of on the ground experience as no hindrance. Secondly is the argument that cash bidding will be a disincentive to offshore exploration because of the extra financial risk involved. Companies will take into account the expected risks and costs involved in exploring a permit when they are considering bidding for the permit, and the size of the cash bid will reflect that calculation. The cash bid in no way changes the risks or the costs involved; rather it is the risks and costs which influence the size of the cash bid. Compared with the work program system, the cash bidding system will actually reduce the risks faced by companies. Under the cash bidding system, companies would be free to undertake the most commercially viable exploration program consistent with the prevailing economic conditions and prospectivity assessments. Under the work program system, by contrast, companies are committed to an exploration program designed up to six years in advance, and must face the considerable risk that changing circumstances will make that exploration program uneconomic. Thirdly is the argument that cash bidding will discriminate against most Australian companies, which do not have access to large amounts of exploration capital. Because of the very high cost, risks and level of technical skills involved, it will always be difficult for the smaller companies to participate in off-shore exploration. Irrespective of the method of awarding permits, it will be the stronger companies which dominate off-shore exploration. It is the applicant who values the permit highest who will be prepared to bid the most under either the cash bidding or work program bidding systems. As has been the case in the past, it is very likely that consortia including Australian companies would be formed to bid for permits under the cash bidding system. Although there are no Australian equity requirements at the exploration stage, many foreign companies seek to include Australian companies in their consortia because of the 50 per cent local equity requirement should petroleum be found and developed. Under cash bidding, there is no reason whatever to anticipate a change to this practice. Permits will be awarded under the cash bidding system without prejudice to the need to meet foreign investment criteria at the development stage. Fourthly is the argument that cash bidding is inconsistent with the RRT concept. The Government's view is that they are complementary measures which will collect for the community a share of the economic rent, or super profit, which results from the exploitation of Australia's petroleum resources. They are complementary in other ways as well. The existence of RRT, and the non-deductibility of cash bids against it, is a significant influence on the level of cash bids. Non-deductibility will mean that bids will be lower. At the same time the existence of an RRT regime in place alongside the cash bidding regime means that companies will not face the risk that, in the event of a cash bid proving too low in the light of subsequent discoveries, some additional form of tax will be imposed to increase the community's take. By combining cash bidding with RRT, companies can bid with certainty as to the return the community expects, and can bid conservatively. There is no foundation whatever for the assertion that the Government's main motive in introducing cash bidding is revenue. The primary objective is to enhance the economic efficiency and equity with which highly sought after permits are allocated, and to overcome the deficiencies I have already detailed in these and other respects in the present work program bidding system. While there is, as I have already said, a secondary revenue objective, that is, to ensure, by the combination of cash bidding and RRT, that the community receives its appropriate share of economic rent, it should be clear from any examination of our proposed cash bidding legislation that the Government is not seeking to maximise revenue from this source. If revenue were the key concern, the Government would be offering large permits with unlimited renewal options; it would be encouraging speculators and it would be allowing deductibility of cash bids against RRT and company tax. I indicated during the second reading debate on the cash bidding legislation that if the cash bidding proposal was rejected, I would propose the introduction of two new imposts: Signature bonuses for the award of permits in the more prospective offshore areas and retention lease premiums. I have subsequently discussed these proposals with the industry but again I believe these proposals represent a second best approach. As I had anticipated, the industry is resisting these proposals in much the same terms as it resisted cash bidding. However, the revenue shortfall created by the rejection of the cash bidding legislation, coupled with the difficult Budget deficit situation which the Government continues to face, remain important considerations. The Government has not yet finalised its consideration of the details of the signature bonus and retention lease premium measures. However, if the cash bidding legislation is passed, it would not be appropriate to proceed with the signature bonus proposal and not be necessary to proceed with the retention lease premium proposal. No realistic estimate is possible of the amount of revenue that might be raised by the award of permits under the cash bidding system. It will depend on the number of areas released during each financial year and industry's appraisal and response to these releases. This Bill also proposes the amendment of the Petroleum (Submerged Lands) (Exploration Permit Fees) Act 1967 to exempt permits awarded under the cash bidding system from annual fees. Taking into account the reduction in administrative work and the small size of cash bid permits, it is not sensible to charge fees which might amount to no more than $400 per year. The amendments proposed in this Bill are essential to allow the introduction of an equitable, effective and administratively efficient system of awarding petroleum exploration permits in the more propective offshore areas. I commend the Bill to the Senate. Debate (on motion by Senator Chaney) adjourned. Motion (by Senator Chaney)-by leave-agreed to: That Business of the Senate, Notice of Motion No. 2 standing in the name of Senator Missen for the disallowance of certain regulations be postponed till Wednesday, 13 November 1985. Debate resumed from 8 October, on motion by Senator Button: That the Senate take note of the statement. Senator MESSNER(South Australia)(10.30) —I move: Leave out all words after `That', insert: `the Senate, while welcoming the promised reductions in marginal taxation rates, believes that the tax package presented by the Treasurer falls well short of the fundamental and lasting reform of our taxation system so frequently promised by the Government, and more specifically, the Senate- (a) condemns the proposed introduction of the new capital gains tax; (b) notes that under the Government's proposals the share of revenue carried by personal income tax will continue to rise; (c) condemns the indiscriminate nature of the attack on fringe benefits and entertainment expenses; (d) expresses grave concern over the effect on enterprise, investment and employment due to the additional cost burdens on business arising from the capital gains tax, the higher rate of company tax, the fringe benefits tax and the loss of deductions for legitimate entertainment expenses; (e) regrets that the package will have an adverse and discriminatory impact upon rural Australia; (f) notes the particularly discriminatory nature of the attack on the deductibility of farm losses against non-farm income; (g) condemns the proposed foreign tax credit system as likely to discourage investment by Australian companies in our region; and (h) while supporting the elimination of double taxation on dividends, expresses serious reservations about the proposed system of imputation which may cause serious cash flow difficulties for business and may produce only benefits of a very restricted kind for shareholders'. This reform may be more appropriately and colloquially referred to by its acronym RATS. Since the Government introduced this package of proposals increasing disquiet has been in evidence throughout the Australian community, including the business community, the rural community and small business. It is clear that an increasing backlash has been generated against many elements of the tax package. Today I would like to highlight a number of specific concerns which the Opposition has concerning some of these proposals, as well making some general remarks which reflect a number of difficulties concerning the philosophy of the Government towards tax reform and highlighting inadequacies in its suggested approach. In particular, the tax package demonstrates inadequate research, inconsistencies between some of the proposals, arguable implementation methods, some basic misunderstandings as to the impact of the system and, overall, an ineffective attempt to introduce genuine reform at a time when bold initiatives are called for. Let me give honourable senators a number of examples of the inadequate research on which the tax package is based. Firstly, the impact of disallowing entertainment expenses as a tax deduction has been estimated by the Shrapnel Company to result in a net gain to government revenue of just $79m. This compares with $310m assumed in the statement of the Treasurer (Mr Keating). Moreover, the economic impact of that proposal has been estimated to reduce employment in the economy by a total of 18,600 people and by 11,100 people in the hospitality industry. Secondly, the fringe benefits tax is estimated to have a significant effect on the motor vehicle industry in Australia. This tax on non-cash fringe benefits may result in a significant loss of sales tax and Customs duties to the Federal Government's coffers through downgrading fleet sizes or through total cancellation of orders. Has that difference been taken into account in the calculation of tax gain? I doubt it. One of the many effects of the combination of negative gearing on rental properties and capital gains tax will be to produce losses on social security expenditure from private renters, particularly those on lower incomes who will be forced to take rental accommodation as a result of the introduction of these two new proposals. While we agree in principle with the elimination of double tax on dividends, the imputation system is a particularly ill-thought out measure to eliminate the double tax on dividends which occurs under the present tax arrangements. Senator Aulich —Keep reading. Why don't you speak to us? Senator MESSNER —For example, there is no provision for refunds of unrecouped compensatory tax credits for individual taxpayers and for tax exempt bodies. It might interest Senator Aulich to know that in the United Kingdom, which has the system upon which this system is based, there are compensatory tax credits owing to companies of #5,000m. That figure represents companies' money in the hands of the tax department that is not allowable or available to any company for future use for investment. That is the kind of system which the Government intends to introduce in this country. The total amount of company tax liability, including compensatory tax, is not limited to the amount of company tax otherwise payable. There is no provision for taxation losses to be offset against compensatory tax; nor is there provision for carryover of unrecouped compensatory tax. The withholding tax on dividends paid to overseas shareholders is not to be eliminated as an offset to the unavailability of an imputation credit to those shareholders. Further, the relationship between the imputation proposal and the foreign tax credit proposal and the implications for our tax treaties need clarification. Dividends may well be lower under the proposal, despite the fact that they would be tax exempt in the hands of the shareholders, since many companies will either feel compelled to reduce dividends so as to equate their company tax liability with the amount of compensatory tax paid or will simply decide to retain an increased proportion of their income. This is because companies, regardless of whether they make a profit or a loss, will be forced to pay the 49 per cent compensatory tax on actual dividend payments to shareholders, regardless of the rate of company tax that is paid. Let us turn to the Australia Card. The establishment of the proposed Australia Card is estimated to cost $297m, with a net revenue gain of just $19m in the first full year of operation in three years time. Apart from privacy considerations the two key issues relate to the cost of establishing and maintaining the system and the impact of the Card in preventing tax evasion and social security fraud. The establishment of the Australia Card would obviously be a costly exercise with very doubtful revenue benefits. This is highlighted particularly by the lack of any identification that would be attached to it. With regard to the quarterly provisional tax proposal, the Treasurer in his statement estimates that interest savings from the reduced need to sell government securities will net another $55m to revenue. But there is no estimate of the tax that will be forgone on the interest that would otherwise be received by taxpayers and declared as taxable income. Has that been included in the estimate of revenue gained? I doubt it. The tax package also contains a number of elements which will, I believe, prove most onerous to business. In particular, the substantiation requirement is a classic case of the bureaucracy imposing its will upon the business sector. It is already known that under the recently announced proposals of the Commissioner for Taxation to allow self-assessment for taxpayers there will be more audits conducted on taxpayers' affairs in the future. Surely, this must amount to a far more effective means of checking for substantiation than the way in which it has been approached by this Government in these proposals. This can be clearly seen as a vote of no confidence by the Government in the Tax Commissioner. The foreign tax credit proposal and the quarantining of farm losses will also prove particularly onerous in the small business sector. The Government's proposed tax package will also prove ineffective in a number of other significant areas. The foreign tax credit proposal, for example, will encourage the businesses competing with aggressive markets in South East Asia which, of course, have lower tax bases than Australia, to seek to locate their official residence offshore, which in the long run will be to the detriment of the Australian economy. The disallowance of entertainment expenses and the tax on non-cash fringe benefits can be expected to lead to creative solutions in the business sector in an endeavour to get around the proposal's effects. That has already become evident, of course. As has already been mentioned, the Australia Card is a costly exercise, the benefits of which have not been clearly spelt out by the Government. It is likely, at best, to have only a marginal effect on reducing tax evasion and social security fraud. In addition, the Government's proposed changes to social security arrangements to alleviate poverty traps are cosmetic. They do little to tackle the real problem involved. The real problem is, of course, the need to address the reduction of the effective marginal tax rates of the many Australians caught in the vicious circle of poverty. Perhaps the clearest and most characteristic weakness of the Government's tax package is that it demonstrates yet again basic misunderstandings of the nature of the economy and of the tax system in particular. For example, the package suggests a complete lack of appreciation by the Government of the power of the tax system to influence economic behaviour at all levels in the economy. This fundamental weakness in its approach is evident in a number of the individual proposals in the package. At the same time the package will introduce additional distortions into the economic system. For instance, it is a clear principle of business tax law that expenses which are deductible to one taxpayer are assessable to another. This is particularly relevant to the proposed disallowance of entertainment expenses which is anticipated to reduce gross domestic product in the total economy by $434m. Legitimate business expenses such as entertainment, which can be properly substantiated, should be deductible. It is high time that genuine tax reform was introduced into Australia. In particular, there is a need for simplicity in a tax system if we are to build respect for tax law specifically and, of course, for the law in general as well. The Government's proposed tax package will in fact prove to be the very antithesis of that need, through the additional complexity it introduces into the tax system. Quite apart from all these deficiencies, the Government's tax package can be quite easily characterised as a farrago. It will be paid for by a rag-bag of rather ratty proposals which are inadequately researched, have conflicting objectives and will add significantly to taxpayers' compliance costs. It does not represent genuine reform. Rather, it is a clutch of devices for bashing businesses, camouflaged by the name of reform. It represents a shameless attack on enterprise, particularly on small business, and is yet another example of this weak Government's capitulation to union pressure. I want to make some specific remarks upon two other areas. Firstly, the fringe benefits tax will be obviously subject to a push from the trade union movement in two ways. On the one hand, unions will push for additional non-cash fringe benefits because they know that the employer will be required to pay tax on that. On the other hand, if employers push for the elimination of fringe benefits, unions will press for higher wages to compensate for the lost fringe benefits. Either way, there will be significant union activity as a result of the introduction of the tax package. The only people who, in the end, will suffer will be the people of Australia as a whole because the tax package will significantly drive up the cost of labour, employment and finding jobs for people and in that way it will destroy job opportunities for those unemployed, particularly the young and those who are seeking part time work. That brings to mind the very real problems that result from the introduction of the disallowance of entertainment expenses. Many people who work in the tourist and hospitality industries do so on a part time basis. Many of them are women and young people. They will now be unable to find work in those industries and will be left out on the streets. It is rather incongruous that at the same time as the Government is introducing a youth employment program called Priority One: Young Australia and encouraging women to find places in the work force through affirmative action, it is seeking to destroy jobs through the disallowance of legitimate entertainment expenses, which of course will lead to the destruction of wide sectors of the hospitality industry. However, it is not only this area which will be significantly affected. The fringe benefits tax will hit the developing areas of Australia, and particularly people such as miners and those who are seeking to establish a business in outback parts of Australia where there is a positive need to encourage people to live. Let me make it quite clear that the Opposition is not in favour of any form of tax abuse. However, it is appropriate to mention that avoidance manoeuvres have arisen chiefly because of the present highly progressive personal income tax scales. The Government has acknowledged this and has lowered the top rates-that will take some two or three years to have effect-yet at the same time it has introduced a tax on non-cash fringe benefits. It is puzzling that on the one hand the Government is aiming to reduce tax avoidance through reductions in the highest marginal tax rates, yet on the other hand it is destined to inspire a brand new tax avoidance industry through the proposed fringe benefits tax which will be aided, abetted and driven hard by the trade union movement. Let me turn to the capital gains tax. It is clear that it is both economically unsound and in- equitable. The basic objection of the Liberal and National parties to the proposed capital gains tax is that not only will risk-taking and enterprise be discouraged through the attack on productive, long term investment-that is, it is a prospective tax and consequently a tax on incentive-but also that it threatens to devalue existing assets such as farms and small businesses which are already in business. In that sense it represents a retrospective tax, a tax against those assets already in existence. Moreover, in designing the capital gains tax to apply to real gains upon realisation of assets acquired after 20 September, the proposal introduces two additional distortions into the tax system, namely, a disincentive to dispose of assets which would be subject to the gains tax and an incentive to invest in the family home at the expense of investment in other productive, long term assets. At the same time there will be a disincentive to dispose of present existing assets. A capital gains tax will also particularly affect the viability of the many small businesses and farms and reduce still further the minimal incentives to establish new enterprises. For example, future risk takers will see their efforts rewarded by having any goodwill built up over a period of years, say, 20 or 30 years, taxed as income in one year at the highest marginal tax rate. Any future risk-taking activity to build up family farm holdings, which is so essential to the development of primary industry in this country at present, and small businesses, will be heavily penalised on the realisation of those assets. The logic of the combination of proposals to quarantine the negative gearing abolition proposal and the abolition of the offsetting of certain farm losses against other income, while at the same time introducing a capital gains tax is, at the very least, arguable. It is certainly illogical. The Government, having justified the abolition of negative gearing and its other proposals regarding farm losses on the basis that no capital gains tax existed, now seeks to hit the nut with a sledgehammer twice by catching taxpayers on both sides of that transaction. Those proposals certainly do not represent a genuine tax reform. Rather, they merely play at the edges of reform. Reform of the tax system should be aimed at improving horizontal and vertical equity but, above all, by improving incentives to work, save and invest, and improving incentives for increased self-reliance and financial independence. The proposed reform will do nothing towards achieving these objectives. On the question of equity, the one group of taxpayers whose lot will not be relieved and may in fact be detrimentally affected by these proposals is the single-income, middle level income family with dependants. They are not likely to find a significant tax reduction from the personal tax cuts. This group, which is struggling to raise a family, will have to pay higher sales taxes on whitegoods such as stoves, refrigerators, et cetera, and the single breadwinner with a company car may lose his benefits as the fringe benefits tax bites on employers. Should the family scrimp and save to invest a little on the stock market or even if the breadwinner is fortunate enough to receive employee participation shares in his employer's company, he will now find any gains subject to a capital gains tax. Should the family decide to show some initiative and go into its own business in order to strive to improve its financial security, the value of goodwill it gains over a period of 20 or 30 years solid effort will be halved by the impact of a capital gains tax which will be applied at the highest marginal rate of tax when the business is sold. That, of course, will only cause those people concerned to become more dependent upon the social security system in their retirement. However, if during the period of building up the business the family seeks to improve efficiency or become more productive so as to employ more Australians, it will find that any gain that is made from trading in old plant or equipment on newer plant, particularly if that plant is leased, will also be subject to the capital gains tax. Therefore, this tax will reduce the capacity of individual small businesses to be able to build up more efficient plant and machinery and so improve employment opportunities for Australians. Where is the incentive? Where is the equity? This same family, which is struggling right now to get established in its own home against the highest real interest rates in 50 years, feels that its standard of living is slipping backwards very quickly. However hard such people struggle, they are caught in the Hawke Labor Government's poverty trap-the greatest poverty trap ever devised. Consider, however, what the Liberal and National parties would provide as an alternative in this area. We aim to take pressure off single middle income families with dependants by allowing income splitting so that the effects of the high marginal rates of income tax will be substantially ameliorated, thus giving families more immediate-not in two years time-disposable income. We will give the family freedom to choose whether the non-working spouse should undertake part time work by allowing a tax rebate for child care expenses. A similar concession will be introduced for single parents who seek to earn taxable income. Finally, we will seek to repeal Labor's capital gains tax upon election to government so as to encourage Australian families to build up their financial security independent of government through taking a direct stake in Australia's wealth. These are the positive, balanced, achievable reforms which the Liberal and National parties proposed at the last election and which remain our taxation policies. They aim to help people-not confuse, damage and weaken them as the Australian Labor Party's reform proposals do. Senator MAGUIRE(South Australia)(10.55) —In 1936, when the United States Presi- dent, Roosevelt, was campaigning for re-election, in a famous speech he said: Taxes are the dues that we pay for the privileges of membership in an organised society. I think that is a very appropriate quotation on taxation. That certainly was the case in earlier years in Australia, but more recently the problem has been that a number of Australians simply have not been paying those dues for membership in an organised society. In fact, a number of Australians have been using government-provided services, but certainly not wanting to pay for them. That was becoming very evident. Addressing that particular problem is essentially what the Government's tax reform package seeks to do. The Government's package constitutes the most major reform of the Australian tax system in the post-war period. I believe it is the most significant change to taxation arrangements in our country since the State governments ceased to collect income tax during World War II. Unlike the Liberal Opposition, the Government is committed to income redistribution. The Government is also committed to the accord with the trade union movement as the basis of its economic strategy. It is very important to note that this taxation package guarantees the continued success of the accord. The Australian Council of Trade Unions is very happy indeed with the tax package. The Government is committed, in its platform to: . . . basing the tax system firmly on the capacity to pay, on the need for an adequate minimum standard of living, and on the desirability of reducing inequality in the Australian community. The notions of redistribution and capacity to pay are tied to an understanding of equity. The idea of equity is usually viewed as having two components-horizontal equity and vertical equity. Horizontal equity means that those with an equal capacity to pay tax should in fact pay an equal proportion of their income in tax. Vertical equity implies that those whose capacity to pay is greater should pay a greater proportion of their income in tax. The Government's package of tax reforms makes the tax system far more equitable. The package has achieved this by taking a serious look at what is meant by the concept of capacity to pay. Previously, money income has been virtually the sole measure of capacity to pay tax. As a result, those who have received their income in the form of capital gains, or fringe benefits of numerous kinds, have paid tax far below their personal capacity to pay. Previously, I regret to say, it had become common practice, especially by wealthy groups, to convert income which was taxable into capital gains which were not taxed. It had also become a common practice for employers to offer non-taxable fringe benefits to their employees in lieu of taxable wages and salaries. For just one 12-month period of which I am aware, the Australian Bureau of Statistics has indicated that there was an 18 per cent growth in the number of Australians receiving entertainment allowances. Nobody can convince me that the Australian economy had changed by 18 per cent in that 12-month period. Clearly, that growth in those particular payments was a tax avoidance device. It is fair to say that some employers have been, in effect, working with employees to help them to avoid paying their income tax. There is no doubt about that. Unfortunately, it has also been a very common practice to divert funds into the various tax havens or shelters which have proliferated in recent years. I refer to hobby farming, film investment and rental properties. The aim of these arrangements-that is the only word that can be used to describe them-has been to shelter a person's principal income from the tax which was properly due on that income. The combination of all these avoidance mechanisms, together with the narrowness of the taxation base in Australia, has meant that more and more of the tax burden has been borne by low to middle income wage and salary earners. That is the group in the community who have received most or all of their welfare in the form of money income and not capital gains or fringe benefits. They are the people who have borne a disproportionate share of the Australian taxation burden. The Labor Government has set about remedying this situation. The Government approached the task of tax reform within the framework of nine principles outlined last year by the Prime Minister (Mr Hawke). Together with these nine principles, the Government announced a commitment to the economic trilogy. In regard to taxation that commitment meant that there would be no increase in the overall level of taxation in relation to Australia's gross domestic product. In summary, the nine principles of taxation reform include commitments to broaden the direct tax base, close off tax shelters and avoidance loopholes, reduce marginal tax rates, rationalise the wholesale sales tax system and reduce the incidence of poverty traps. I will go into the last point in more detail later because I believe that it has not been adequately addressed in this chamber and it has been totally ignored by the Opposition. The Government has addressed all of these items and more. The tax package provides significant taxation relief. When fully in force, the package will cost the Government $4,500m and only $1,500m will be raised by the other reforms in the total package. So overall there will be some $3,000m in tax cuts to be financed from general revenue. As a result of the tax package the Australian taxation system will be simpler, fairer and more efficient. The package certainly helps to implement the Government's redistributive and equity objectives by reducing the burden of personal income tax rates and broadening the tax base to ensure that upper income earners can no longer avoid meeting their proper taxation obligations. The tax package provides substantial benefits to low and middle income earners. The September tax reform package is the second and major instalment in the Government's three-year program of taxation reform. Some measures, of course, are already in force; some other aspects of the package are yet to be finalised. The tax cuts to be introduced from September next year complement those introduced by the Government last November. In November 1984 taxpayers with weekly incomes of between $240 and $538 received a weekly tax cut of $7.60. The standard or bottom tax rate was reduced from 30c in the dollar to 25c in the dollar. Those tax cuts represented stage one of Labor's planned tax cuts for low and middle income earners. From September next year the tax free threshold will be increased from its current level of $4,595 to $5,100. The 25c in the dollar tax rate will be reduced to 24c, the 30c rate to 29c and the 46c rate to 43c. I think it is very important that all honourable senators note that as a result of this taxation package the lowest marginal tax rate which will apply under the Labor Administration will be 24c in the dollar. The best that the people on the other side of the chamber could manage was 30c in the dollar. That is one of the principal differences in taxation between this Government and the Opposition. The lowest tax rate in all the years of the Fraser Administration was 30c in the dollar, and under this Government it will be reduced to 24c in the dollar. We clearly are the low tax party in this country. As a result of these marginal tax rate changes, in combination with the higher tax free threshold, a taxpayer on average weekly earnings will receive next September a tax cut of around $6 a week. In addition, I am pleased to say, 130,000 taxpayers throughout Australia will be totally freed from any taxation liability as a result of the increased tax free threshold. In July 1987 the 43c in the dollar marginal rate will be further reduced to 40c in the dollar. This will give additional taxation reductions to middle income earners. Overall, middle income earners will find that from July 1987 they will be paying taxation at a rate of 40c in the dollar on their extra income, on their marginal income, whereas at present the rate they pay is 46c in the dollar. Changes announced by the Government to the Medicare levy threshold and the ceiling for Medicare levy contributions will complement these tax cuts and will further emphasise the redistributive nature of the Government's taxation package. For example, individuals with taxable incomes below $7,526 and families or sole parents with incomes of $12,504 or less will now be completely exempt from paying the Medicare levy. It is very important to note that a single income earning couple with two children, if they have income below $15,564, will now no longer be liable for the Medicare levy. On my calculation-as I am sure it is on Senator Robert Ray's calculation-$15,564 is by no means a bottom income in Australia these days. To reiterate, below that figure a single income earning couple with two children will now no longer be liable for the Medicare levy. On figures provided to me it is estimated that around 280,000 Australian taxpayers will benefit from the new arrangements in regard to the Medicare levy. The new arrangements in regard to the Medicare levy will mean that over a quarter of a million Australian taxpayers will benefit. The Government has announced a number of measures-both in the September tax statement and also in the August Budget-to reduce poverty traps. Poverty traps occur when those on income tested welfare payments face very high effective marginal tax rates on additional earings. In addition to being income tested, most pensions and benefits are also subject to personal income tax. The combination of the income test and personal income tax means that some pensioners and beneficiaries face effective marginal tax rates of over 100 per cent. They can actually lose more in pensions and benefits than they actually earn in extra income. Of course, a 100 per cent marginal tax rate is well above the highest marginal tax rate, even under the Liberals, of 60c in the dollar faced by employed members of the community. As a result of these high effective marginal tax rates, welfare beneficiaries may feel trapped in a situation where the opportunity and desire to work are present but the economic rationale for doing so is not. In terms of the response of the Liberals, low income households have little incentive under the present arrangements. In listening to an urgency motion moved by the Opposition yesterday, I was rather struck by the fact that in all of the speeches from Opposition members about incentive there was absolutely no reference made to incentive for low income Australians. The debate was all on the assumption that there should be incentives for the big people in the community. It just shows the groups in the community to whom the Opposition believes it owes allegiance because there was absolutely no reference in any of the speeches for the need to provide incentive for low income Australians. I am going to spend some time now enlightening the Senate, particularly Senator Messner who is completely ignorant of these arrangements, as to just what the Government has done to give incentive to low income Australians-the forgotten group under the Liberals, the group that Senator Messner and his colleagues ignored yesterday in moving a motion in this place about incentive. The Government has taken a number of measures to remedy the severity of poverty trap situations in Australia. For example, taxation rebates for unemployed persons and other persons receiving social security benefits are to be increased from $75 a year to $220 a year for a married couple and from $50 annually to $175 annually for single unemployed or social security beneficiaries. As a result of that particular change, those persons wholly or mainly dependent on social welfare benefits will pay no tax in this financial year. They will certainly have greater incentive, but there was absolutely no reference made to that yesterday by Opposition spokespersons. Recipients of social welfare benefits will be able to earn more private income before their total income is subject to tax; hence, the easing of the so-called poverty traps. A further measure announced by this particular Government to apply from May 1986 is that the income test-free area for unemployed and other benefits will increase from $20 a week to $30 a week-a 50 per cent increase from May next year in the allowable income of unemployed and other persons receiving social security benefits before their benefits are reduced. From November 1986 the income test-free area for pensioners is to increase from $30 a week to $40 a week for single pensioners and from $50 a week to $70 a week for couples. These are all measures that boost incentive, none of which has been referred to by the Opposition in this place. From November 1986 the amount of extra income disregarded for pensioners with children will be doubled from the present $6 a week to $12 a week per child. Most importantly, there will be now no longer a separate income test for rental assistance. At present in Australia rental assistance is available for persons who are receiving pensions and who are renting from private landlords. There is a separate rent income test to receive that assistance. We have abolished that income test and that will mean an increase in the disposable income of Australian households receiving social security payments of up to $15 a week from next year. That is a very, very large increase for low income families. These five measures, which will dramatically reduce the extent of poverty traps in Australia, are expected to assist about one million low income Australians in the next two years. I think that is a very significant group, a group which was totally ignored yesterday by the Opposition in all its rhetoric about incentive. We are the party which has done something about incentive. The Opposition chooses to ignore that particular fact. It can be estimated that a sole parent pensioner with two children renting a property from a private landlord, and perhaps having $70 a week of non-pension income, will be $26 a week better off as a result of these changes made by the Government. What an incentive we have provided households in those particular circumstances! I believe that those particular measures to ease poverty traps will help ease the transition from a person being on welfare to full time work. They are progressive taxation reforms designed to lessen the Australian tax burden on those households least able to pay. With the introduction in Australia of a capital gains tax, as I pointed out yesterday, Australia at last has joined the other developed countries of the world in the twentieth century because for many years most of the developed countries in the world-- Senator Button —Not Senator Messner though. Senator MAGUIRE —No. I think he is a seventeenth century patrician. Of all of the developed countries in the world, only the Netherlands and Australia had no capital gains tax. The capital gains tax which has been introduced by this Government is very mild. It is totally prospective. It applies only to assets purchased from 20 September onwards. It does not apply to farms and small business assets and other assets owned before 20 September. The only gains that will be taxed under the capitals gains tax will be real gains. A person will be able to look at the consumer price index, calculate how much of the apparent gain in the asset value is due to the consumer price index and deduct that before calculating the tax which is payable on the gain. That is a very generous provision, as I pointed out yesterday. It is certainly far more generous than that handed out to persons who receive most of their income through wages and salaries because the fact is that there is no indexation of taxation brackets for wage and salary incomes. Those whose economic welfare comes principally from buying and selling assets and from increases in asset values will receive favourable treatment compared with wage and salary earners. Of course, capital losses can be offset against capital gains. That means that in the case of some investments, because the loss is fully deductible against the gain, there is a reduced risk of loss on the investment. Family homes will be completely exempt from the tax and the capital gains tax is estimated to raise some $25m per annum in its fifth year of operation. However, despite the small revenue that is to be raised from the capital gains tax, it should stem the growth in the practice of converting taxable income into untaxed capital gains. As I pointed out earlier this morning, this practice has provided the basis for many of the big tax avoidance schemes of recent years in Australia. As a result of closing off loopholes in the income tax system and the introduction of the capital gains tax, much more revenue will now be collected through that tax system. I believe we will be able to collect hundreds of millions of dollars more in taxes through the income tax system as a result of the introduction of the capital gains tax. As I pointed out today, the practice of providing remuneration in the form of non-taxable fringe benefits has escalated in recent years. I detailed to the Senate the fact that in a 12-month period there was an 18 per cent rise in the number of Australians receiving entertainment allowances. Clearly that was an element of tax avoidance, where entertainment allowances were being provided to employees in lieu of wages and salaries. In recent years employers have offered employment packages which have included company cars, low interest loans, cheap air fares, credit cards and payment of children's fees at private schools. A lot of these devices have been used in recent years to provide remuneration to employees in such a form that they were not subject to the Income Tax Assessment Act. I take the view that if employers wish to continue offering such benefits to employees they now have to pay tax on them. Hopefully if employers do not take that road, they will increase wages and salaries instead. The lower marginal tax rates, announced by this Government, will remove much of the attraction of making remuneration in the form of fringe benefits. The Treasurer (Mr Keating) has made it clear that he believes that the fringe benefits tax will have little effect on the car industry in Australia. Possibly there will be a shift to smaller cars. Certainly one of the major producers of motor vehicles in my State, Mitsubishi, is very happy with the arrangements. I believe that if motor vehicles are genuinely necessary for the performance of business, they will continue to be purchased. As a result of the very large tax cuts made by the Government some Australians will now be able to purchase their own car for the first time with their higher disposable income. I repeat that there is to be no overall lift in tax as a result of this taxation package, so many more taxpayers will be able to increase their expenditure as a result of their higher disposable income after taxation. The practice of lavish entertainment by business people being written off as a tax deduction had to stop. We in the Government certainly do not believe in the free lunch-led economic recovery as do the Liberals apparently. Entertainment was a clear abuse of the taxation system which was available to a small privileged section of the taxpayer population. Low to middle income taxpayers will no longer be forced to subsidise the social activities of well-off people. The only effective way to prevent abuse of the system was to abolish completely deductions for entertainment. Having read the papers avidly since this particular rort was abolished, I note that nobody, in trying to defend it, has ever said there were no abuses. Every person who has made a statement calling for changes has admitted there were abuses under the system. It is possible there might be some job losses in the entertainment and hospitality industries as a result of these changes, but this is by no means certain. Naturally this matter would be of concern to me as a member of the Labor Party if it happened. I believe that restaurants will have to change their target clientele groups. I commend a leading Adelaide restaurant which has already responded appropriately to the Government's tax package and changed its approach to marketing. I believe it is doing very well indeed. The large tax cuts provided in the tax package will allow a greater cross-section of taxpayers to spend more money on entertainment-from their own pockets and not from the community's pocket. There have been some very good responses in the overall community to the Government's tax package. I noted the comment made by a leading Adelaide restaurateur, Mrs Jill Heaven, who manages the very prestigious Ayers House restaurant. She said that the legitimate business lunch will live on, but of course restaurants will need to adjust. A comment was made by Mr Harold Lasky, the Managing Director of Diners Club Ltd. Most of his business comes from the entertainment area of the community. He said: I think the people who are genuinely involved in a lunch to discuss business will continue to do so. I quote now from a response to the changed tax arrangements for company cars. Mr Graham Longbottom, Deputy Managing Director of Mitsubishi Australia, said: Mitsubishi could be unscathed as fleet owners, looking for more value for money, could move down to smaller cars. He said that this would suit Mitsubishi, which offers cars in the small car range. In regard to the claims made about the impact of the tax package on the farm sector, I simply refer to a comment by Mr Jim McCarter, the rural affairs editor of the Adelaide Advertiser. He said: Land values generally do not increase at a rate much different from the inflation rate, so farmers are likely to pay little or no capital gains tax. He is saying that because this Government, in its wisdom, has provided for land and asset values to be indexed for inflation for capital gains tax purposes, because rural land values do not rise on average over the medium to long term faster than the inflation rate, there will be little effect on the rural sector as a result of the Government's tax package. The removal of the double taxation of dividends from July 1987 is expected to increase the role of company dividends in the economy. I am pleased to note that there will be more investment in solid industrial companies paying dividends, as against speculative activity. I am sure that will benefit business, particularly in my State of South Australia where the company base is more in the industrial area. I believe that the capital gains tax will discourage speculative investment in property, asset prices will reflect more the incomes produced by the assets and the capital gains tax will encourage investment in more productive employment-generating areas such as manufacturing. As I have indicated, it is possible that there may be job losses in some industries as a result of the Government's tax package. However, as I pointed out at the beginning of my speech, overall the tax package will not lead to a loss of jobs because the tax changes are essentially of a redistributive nature, that is, changing the tax burden between members of the community and not increasing the overall taxation burden. There will be no increase in the level of taxation in relation to Australia's gross domestic product. I think it is very hard for the argument to be sustained that overall there will be job losses as a result of the tax package. A number of Australians will receive significant tax reductions as a result of the package, and as a result of the extra expenditure by those Australians jobs will be created in other areas. Overall I believe that the Government's tax package has been very well received by the public. The holding of the National Taxation Summit in July played a very big role in that response. I think it raised the consciousness of Australians about the abuses going on under the present tax arrangements. It certainly increased the understanding in the general community about taxation in our country. The tax package is seen by the electorate as constituting a genuine attack on tax avoidance. It will result in the Australian taxation burden being placed more on the person's ability to pay tax and income will no longer effectively be the sole determinant of a person's capacity to pay tax. The scale of tax shelters will be reduced and the Australian taxation system will be fairer and more equitable and taxation will no longer be voluntary for the wealthy. Senator PARER(Queensland)(11.25) —The Opposition welcomes the opportunity to debate the September statement by the Treasurer (Mr Keating) on taxation reform. Indeed, we commend the Government for placing taxation reform so firmly on the political agenda. We also acknowledge the difficulty of obtaining complete community support for meaningful taxation reform. Yet, the high hopes raised by this Government's taxation review have been dashed by its own incompetent handling of the whole issue. The result is a package that will not provide real reform, that does not solve the long term tax problems the Government set out to solve and that will not make our economy operate more efficiently. It is a package containing major elements that already have been rejected by the private sector and by many commentators aware of the economic subtleties involved. It is a package that the Treasurer did not want. It is the option that was delivered by consensus politics with the Australian Council of Trade Unions. It is a package that has been bargained for, not a package that has resulted from political will and a commitment to genuine reform. The Treasurer's statement was entitled `Reform of the Australian Taxation System'. Senator Maguire called it a great reform. What a misnomer! The Trade Practices Commission should look at it in the context of false advertising. It was obviously designed to salvage some remnants of dignity from the fiasco called the `National Taxation Summit' and the Government's preferred option C. The result was accurately depicted by a Bulletin cartoon of the Treasurer going to the Summit to collect the Ten Commandments and coming back with one and a half tablets. To call it reform is to tax the most fertile of imaginations. The tax review process undertaken over the last 12 months tells us much about this can do Government. The impetus for reform came from the Opposition prior to the last election. We had a tax policy. The Government did not. The Government's response was very much a response on the run. The Prime Minister (Mr Hawke) hastily put together his nine principles of taxation reform and then revealed the depths of his political wisdom by calling for a summit on taxation. These two steps enabled the Government to get through the 1984 election campaign without a tax policy. Following the election, the ongoing debate on tax reform almost destroyed the Government. It revealed the Australian Labor Party bitterly divided over a crucial Government decision, a Labor Party unable to agree on the most basic of principles and a Labor Party still without a tax policy. The Summit process also says a lot about this Government. It is a Government unable to make its own decisions. It is a Government run by vested interests, by deals and by compromise with the ACTU. The Summit process tipped executive government on its head. It demeaned ministerial responsibility and by-passed and ignored the proper role of Parliament. More fundamentally, it was a flawed way of reaching decisions. It just did not work. In effect, the Summit destroyed the Treasurer's will to reform the taxation system. The damaging debate had to be stopped. Hence the quick fix at the Canberra International Motor Inn with the ACTU bosses, behind Mr Keating's back. The Summit had to be shown to be of some use. The research, the White Paper, the public debate, the seminars, the conferences, the factional meetings and the hard sell by the Treasurer all came to nothing. The Government's preferred option C, much to the Treasurer's embarrassment and obvious annoyance, was ditched. In its place a grab bag of measures, hastily conceived and internally contradictory, was presented to the electorate. Yet even this compromise did not and could not survive. The eventual outcome was the package announced in September. So what can we say about the Government's approach to tax reform? The idea of tax reform came from the Opposition. The response was made hastily without consideration of the consequences. The debate nearly destroyed the Government. The Summit made a farce of government decision making. The public debate sapped the electorate's willingness to accept meaningful change in the taxation area. The wheeling and dealing merely confirmed the hold the ACTU has over the Government. The final package, the package not preferred by the Treasurer, has put real reform on the backburner and, at the same time, alienated significant groups in the community. We still do not know what is to be in the legislation. The Treasurer, perhaps understandably, lost his appetite for tax reform. `This is the end of it', he said. The real tragedy is that the greatest opportunity this country has had for tax reform for years has been botched by the Government and by the politics of consensus it employs. The irony, of course, is that in the process the Government has sacrificed its tenuous relationship with the business community, so carefully nurtured by the Prime Minister and the Treasurer. So much for the Government's approach to tax reform and its methods of making decisions. What of its rationale for tax reform? The one thing that those at the Summit, the Government, the Opposition and most commentators agree upon is the need for reform to solve a set of problems in the current tax arrangements. These problems are: High marginal tax rates which act as disincentives to working, saving and investing, the complexity of current laws, a narrowing tax base, and an increasing reliance on direct income tax. Most would agree that all these aspects of the tax system are problems and, moreover, that they are the principal problems to be addressed by tax reform. There would, of course, be disagreements as to which are the most pressing of these problems and, hence, which priorities should govern the reforms. The Government has attempted to explain its actions by talking about tax avoidance and evasion. We have seen the Minister for Finance (Senator Walsh) valiantly attempting to explain the Government's position by fighting his way out of it with a brown paper bag. As a tactic to divert people's attention away from the real cause of high taxation, the Government goes on about rorters and cheats and its strategy to broaden the tax base by reducing tax shelters in order to lower the marginal rates. It is patently obvious that neither the Treasurer nor the Minister for Finance believe this nonsense. It is a pity that they are not more honest and admit that their genuine efforts at tax reform were destroyed from within their own ranks and by the ACTU. The Opposition does not accept that tax evasion and avoidance are the reasons for the existence of high marginal tax rates in this country. Nor is it clear that engaging in activities that avoid tax is confined to the few. In fact, high marginal tax rates are caused by excessive government spending. The high rates cause avoidance, and not the reverse. The ever-growing government sector, which now consumes nearly 45 per cent of our gross domestic product, can be financed only be further tax hikes-so much so that the average wage earner is now paying 150 per cent more income tax than he was 30 years ago. High marginal rates cutting in these days at quite ordinary levels of income, combined with inflation, force many honest people to minimise their tax, mainly by taking some of their income as non-taxable fringe benefits. To label these people as crooks and rorters, as the Treasurer and the Minister for Finance continually do, is not only insulting but also entirely misses the point. It says more about the obsession of senior Labor Ministers than it does about the relative fairness of our tax system or the reasons the system should be reformed. This attitude on the part of the Government also conveniently ignores the fact that most working Australians receive some sort of fringe benefits. A recent survey by the Australian Bureau of Statistics revealed that in August 1983, 57.9 per cent of employees received one or more of the 15 benefits surveyed, which included entertainment allowances, superannuation, holiday expenses and some goods and services. By August 1984, that figure had grown to 60.3 per cent. It appears from evidence such as this that the rorters and cheats are spread fairly widely throughout the community. Of course, it is clearly the case that many activities which minimise tax have important econmomic benefits and spin-off consequences-for example, negative gearing, the ability to offset farm losses against non-farm income and the tax deductibility of business entertainment expenses. It is simply a myth that tax avoidance as defined by the Government is confined to a few cheats ripping off the system at the expense of the vast majority of honest, oppressed taxpayers. This is simply convenient rhetoric. The incentive to minimise tax resulted from high marginal rates biting at low levels of income, and its incidence reflects an overreliance on direct taxation and a belief on the part of many people that the government spending policies simply waste their money. The increased reliance on income tax is borne out by the fact that 30 years ago the Commonwealth received 35.3 per cent of its revenue from income tax. By 1985 that figure had increased to 53 per cent. High marginal rates have also been brought about by the policy of successive governments not to tax income below the threshold, despite the fact that much of this income is earned by people who are in no sense needy. I refer, for example, to the spouses of high income earners who at present can get tax free pocket money to the tune of $4,595, to those who work part time or for only part of a year, and so on. It seems that those tax avoiders are moral whereas those receiving non-taxable fringe benefits are not. Clearly, the Government has the problem around the wrong way. It refused even to discuss expenditure reductions, as opposed to reduced real spending increases, as a means of financing real tax cuts, which is what tax relief is all about. It sees tax avoidance as a cause rather than a result of high marginal tax rates. It is obsessed by so-called tax immorality yet, by not increasing indirect taxes, it refuses to acknowledge the importance of the cash economy as a means of avoiding tax; nor does it recognise the fact that the evasion schemes were wiped out by the previous coalition Government. The Government's much vaunted cuts in marginal rates will largely be financed by inflation. In the absence of tax indexation the slightly flatter rates being introduced by the Government will lose much of their appeal. Moreover, a better way to restore incentives both to work harder and to pay taxes is to raise the salary levels at which high rates bite rather than to drop the rates themselves by a few cents. Losing half of one's extra income in tax can hardly be said to restore an individual's incentive to work, save and invest, which is the fundamental economic reason for tax reform in the first place. Not only was the Government's approach to tax reform disastrous and counter-productive but also its tax reform aims were misconceived. Base-broadening measures by means of the introduction of new taxes such as fringe benefits taxes, capital gains taxes, the quarantining of non-farm income and the abolition of negative gearing may close off some tax loopholes but they will not destroy tax avoidance and they will not enhance incentives. Base-broadening by means of more reliance on indirect taxes is much preferred. The Government has simply got it wrong. It knew what to do but it was unable to do it. Let me turn to the package itself, to its timing and to its likely economic consequences. There has been a growth in the grocery list of fringe benefits. They grew quite openly, mainly in the pay as you earn sector, because of the level of taxation. In fact, many of the fringe benefits were brought about by the requirement by unions that any increases be in the non-taxable area. These fringe benefits were a response to an unacceptable level of personal taxation. With the Government's clampdown, it is the already over-burdened PAYE group which will pay, either directly or indirectly. In many areas, as anticipated by the Treasurer, the burden will shift over time from the employer to the employee. In other cases it will be passed on to the consumer. In the case of exporters, whose prices are fixed, it will be absorbed. Many of the non-cash fringe benefits fall into grey areas and will be virtually impossible to police without a further army of investigators, whose costs will significantly diminish the returns. Senator Button —That is absolute rubbish. You should look at the procedures. Senator PARER —It has already been agreed that another 700 people will be employed in the Australian Taxation Office to look at this. Senator Button —Are you talking about fringe benefits? That is rubbish. Senator PARER —I am talking about the new tax measures. Mining employees, because of the location of mine sites and, in some cases, the expected life of mines, have been granted special conditions. The companies have been told that they will be given a special housing concession. They will be taxed on 66 2/3 of the difference between the estimated commercial rent and what is paid by the employee. Additionally, companies will be taxed on the maintenance of these homes. This is a new tax on the mining industry, which is already overburdened with state charges and a very competitive world market. Governments which make these artificial impositions, whether they be Federal or State, do not seem to understand that every artificial cost reduces the level of economically recoverable reserves and thus reduces the lives of mines and employment. The removal of legitimate promotion and entertainment expenses not only denies normal section 51 deductions but also has a negative multiplier effect on the economy. We all know that there were some who abused the system. However, in the overall scheme of things, that abuse was minor when compared with the impact on honest business. In my own business experience I disliked business lunches and dinners. I always looked upon them as being among the more tedious and demanding of chores. Be that as it may, they were and will always be an essential ingredient in trade, particularly in promoting exports from Australia. International buyers expect the courtesies they provide when Australians are in their countries. Such lunches produce a different atmosphere from that at the negotiating table and provide the opportunity for long term relationships to be established and cemented. While this expense is now denied to our front line traders, we are engaging in a massive Expo `88 promotion, funded by the taxpayer, to sell Australia to the world. Another inconsistency is that Ministers opposite have hosted or attended functions involved with the promotion of our exports. This they can still do, but if they attend a promotional function hosted by an Australian company, the considerable expense involved will no longer be deductible. What of the small businessman who has an opening ceremony function, where he invites his local parliamentary representatives, customers, potential customers and the Press to his new premises, simply to promote his new business or location? He does it not because he wants to spend his hard earned money but because he wants to promote his business. This is specifically excluded as a tax deduction; yet it is an expense incurred in earning his assessable income. If he did not expect to get new business from both the contacts he makes and the press he hopes to receive he would not waste his money. On the other hand, he can do as much advertising as he likes, even on a sail on a yacht, and claim a deduction. Presumably, whatever is paid to an advertising agency will be allowable. It is obvious what will happen. There will be-I think it has already started-a proliferation of seminars and barter arrangements. As I said earlier, there are some-a minority-who abuse the system, but the majority is being quite incorrectly and unfairly penalised because of that minority. The hallmark of this Government seems to be government by and of the minority. The capital gains tax is yet another broken promise. The words of the Prime Minister in the run up to the 1983 election have often been quoted. He said: Let me say in words even my opponents will understand, there will be no capital gains tax. At this stage the new tax has been sold as minor. Everyone knows, however, that over time, once there it will be a major impost. Even at this stage when we need more employment in the private sector, it will be damaging. Its introduction shows a complete lack of understanding of how small businesses start. Most start with leased equipment and borrowings for working capital. This measure means that any new business commencing from September 1985 will pay capital gains tax on 100 per cent of goodwill accumulated. Every small business starts with the hope of building something that will provide the risk taker with the possibility of success that surpasses the consumer price index. Many do not succeed. If the potential to succeed is taken away, what incentive is there for a person to forsake the security of a paid job? A capital gains tax does not affect big business. It is a direct frontal attack on small business. The same sort of mentality applies to the limitation of non-farm income to farming losses of $15,000. This proposal will stop the growth which has occurred in the past of, for instance, avocado and macadamia nut plantations, which require massive injections of capital for many years before production. The improvement in efficiency and the modern techniques introduced over a whole range of rural products owe much to the ability to use non-farm income. That is why our rural producers are so cost competitive. The value of rural properties will fall because of this limitation, the capital gains tax, in the form it is today and the justifiable fears about how it will change in the future. Many Australian individuals and companies have invested overseas because of the forward-thinking policies of other governments, some of which have offered tax holidays to companies prepared to invest in new industries in their countries. This has been to the advantage of Australia, as well as to Third World countries. The amendment to the foreign tax credit system will demolish those incentives and the returns to Australia in additional export income will be wiped off. I predict that under these new conditions Australia will become a branch officer country rather than a head office country. The imputation system for company tax appears to be a welcome measure. I must say that I have never understood why returns on borrowed money were an acceptable deduction, whereas returns to shareholders were taxed. Both are rewards for capital investment. Yet there are growing concerns in the business community and elsewhere that the imputation system may cause severe cash flow problems for many companies. Again, the implications have not been thought through. Amendments to the income tax scale are welcome. As anticipated, however, they contain an element of `now you see it, now you don't'. As I have said, fiscal drag or bracket creep, whereby inflation lifts the average wage earner into a higher tax bracket, will reduce any gains to less than the price of going to the pictures over a two-year period. The identity card without a photograph is an attempt to stop the frauds which we all know were being perpetrated on the social security system by Labor supporters. Instead of attacking the cause, it is an attempt to tackle the disease. From what we know so far-and we do not know much-it is very doubtful whether the attempt will succeed. If it does not, it will have been a very expensive exercise, like so many others, where taxpayers' money has been wasted. So many of our social security payments are wasted. They are going to single mothers, for instance, when the fathers of the children are not contributing a cent to their maintenance. Without the fathers being accountable or having any responsibility, is it any wonder that a high level of other people's money is being paid to single parents? The Treasurer in his opening remarks said that there was a time when Australia had a reasonably sane and credible taxation system. Apart from the total neglect of the linchpin of our society-the family unit-by this Government and the Whitlam Government, the taxation system has not really changed to any significant extent. It is government which has changed and has got itself into the duplication business of taking over roles which should be the responsibility of the States, in areas such as education, health, local government, environment, export controls on international trade and so on. It is government which has borrowed huge amounts of money and is thus bequeathing the next generation a debt to pay, as well as providing for itself. This Government, with its redistributionist ideology, penalises success and rewards and encourages failure. Instead of promoting wealth, the Treasurer, emasculated by the insane Left, has bravely defended the final package and has proudly announced that we will be taxed only half our earnings. That is before a man with a family has made repayments on his home and car, purchased food and paid local government charges, school expenses and many other State government charges. The family man has had enough. He and his family are revolting because they see government as revolting. That is why, to quote the Treasurer, `tens of thousands of people have walked away from the system'. That is why, irrespective of measures taken, they will continue to do so. If the Government thinks that this so-called reform will change that, it really does have an ivory tower mentality. Since John Howard closed the major tax loopholes, the more sophisticated tax evasion industry has been dead, but the cash economy will continue to thrive. By any measure this Government's tax package is a failure. The Government's bungled approach to the taxation review has postponed, probably for many years, the prospect of real and lasting reform. The Government has got the challenge of tax reform the wrong way around. It is obsessed with avoidance and it fails to see that government spending levels determine the level of taxation. The Government has not solved the problems that it set out to solve in response to pressure from the Opposition prior to the last election. The Government's final package will have a disastrous effect on the economy at a time when this country desperately needs more growth, investment and jobs. Clearly the agenda for tax reform is an ongoing one. Senator SIDDONS(Victoria)(11.50) —First, let me say how nice it is to see Senator Button back on the job. We hope that he has recovered from his bout of flu and can listen to the tax debate. His input is always welcome. The Opposition has moved an amendment to the motion that the Senate take note of the Government's statement of taxation. The Australian Democrats do not propose to support that amendment, for the very simple reason that it is couched in very airy-fairy and imprecise terms. We believe that we all have a responsibility in this Parliament to make clear our position on tax reform. The Opposition has failed to do that. It has pussy-footed around and has said that it will wait until it sees the legislation. Presumably the reason for that is that it cannot make up its mind. It is my intention, on behalf of the Democrats, to outline precisely our position on the Government's taxation packages. We have wrestled with the problem of tax reform for many months and we intend to make our position clear to the Parliament and the Government. The first thing that has to be said is that it is necessary to face up to tax reform. It is necessary because marginal taxation rates of 46 per cent on the average Australian tradesman and school teacher are just not on. Marginal rates of 46 per cent were designed to catch millionaires 20 years ago and they are impinging on the average Australian today. We have an urgent responsibility to face up to tax reform, and the Democrats want to consider the Government's package and constructively criticise it. Capital gains taxation was debated at some length yesterday. We believe that a capital gains tax is necessary if tax avoidance is to be cracked down on, investment in productive areas of our economy is to be encouraged and the chase for paper profits, which has been so much a part of our society over recent years, is to be stopped. We support the Government's initiative in introducing a capital gains tax. We are pleased that the Government has taken note of factors in relation to this which the Democrats have made clear virtually from the formation of the party in 1977. We note that the family home will not be taxed, so that the capital gains tax will not impinge on the area where the capital of most Australians resides. That is good. We are pleased that the mooted death duty element has been withdrawn. The capital gains tax will be indexed for inflation, and that is vital. I made the point yesterday that an indexed capital gains tax applied at the marginal rate is a milder tax than the flat rate capital gains tax that applies in the United States of America and the United Kingdom. The capital gains tax is very reasonable and it should not impinge unfairly on particular areas of the community. There is to be no retrospective element whatsoever and the tax will apply only on the realisation of the asset. Having said that and having outlined our support, there are six problem areas that we see with the capital gains tax and we hope that the Government will address them. They are: First, the differential treatment of the family home and the family farm; second, the need for averaging provisions over five years on the sale of small businesses; third, the need to allow a proportion of goodwill as a deduction from capital gains tax on the sale of a small business; fourth, the unfair treatment of employee shareholders; fifth, the problem of double tax on retained earnings and, sixth and last, consideration of whether the realisation of capital gains on gifting is reasonable, particularly in the case of a family farm which may be passed on to members of the family. I will outline briefly our concerns in those six areas. First, the family home is to be excluded but there is no upper limit on this. A home of, say, $1m will be exempt from capital gains tax whereas a family farm which may be worth only $500,000 and which would have a very low value home on it is to be exempt only insofar as the low value home and the curtilage of the farm are concerned. That seems to us to be clearly unfair. Surely some consideration should be given to this inequitable treatment between a city dweller and a country dweller. There are various ways in which this problem can be tackled. I do not believe it is up to the Australian Democrats necessarily to outline the ways they would prefer but we do certainly state that there is a problem. The second problem I mentioned was the averaging provisions for small business. As I said yesterday, small business is a very productive and essential area of the economy. Many small business people build up their asset over a lifetime of hard work. It is unfair that when they sell their business, if they choose to do so or have to do so, that asset which has been built up over a lifetime should be taxed in one year at a very high marginal rate. Averaging provisions would overcome this problem. The same argument essentially applies to the goodwill element in this sale of a small business. It is an intangible asset built up by the owners of a business through their being efficient, reliable and helpful over many years. It is a personal element of the business. Small business people work long hours servicing their clients. They tend to the requirements in the community in a flexible way that large business cannot do with its rigid requirements of overtime, bureaucratic structures and so forth. Small business people, through their diligence, keep the rest of the economy running. They are the indispensable part of the social and economic structure of the modern capitalist society. Let us look at Japan, the most successful industrial economy in the world. It is dominated by large corporations which rigidly organise themselves, yet these giant corporations in Japan depend for their existence on a myriad of small suppliers and contractors which provide the necessary flexibility to allow that economy to function. If we wish to emulate the Japanese success in industry, it is clear that we must encourage a modern, robust small business sector. We should take note of the fact that small business people work long hours and put a lifetime of effort into the establishment of their business. Very often they accept a low wage rate and build up the goodwill element in the business. That should be recognised. Of course, there would have to be safeguards to ensure that the goodwill factor is not abused. It is an intangible asset. It could be set down as a percentage of the total value of a business, but it should be recognised. Employee shares are a problem. As we understand the present legislation, there will be a very severe disincentive for employees to own shares. They will be taxed at the marginal rate over the period in which they purchase those shares. If there is any capital appreciation, that will be taxed as personal income and not as a capital gain. Obviously, that is very unfair and will be a great disincentive to further development of employee share initiatives. Lastly, there is the problem of realisation of capital gains tax on gifting. This is a problem because many family farms are passed on to children. If capital gains tax is to apply as these family farms are passed on to the children, many of the farms will have to be broken up. That would be a great pity. I turn now to sales tax. The Government has indicated that it intends to rationalise sales tax, which we think is a good thing. But we will oppose some of the changes. I list three of them. The proposed tax on solar heaters is very unreasonable and unfair. There is still a world energy shortage which will become worse as time goes by. Australian designed solar heaters are a rapidly developing export market. Solahart in particular has been very successful in selling its units to the United States of America, and all around the world. It would be a pity to impose an additional tax at this stage on this sunrise industry. Senator Button —Don't you think you are introducing a distortion into the tax system if you proceed like that on the basis of a particular view? Senator SIDDONS —We believe there are some overriding cases. I am listing only three. They are the three cases that stand out in our minds as the three that should be addressed. Senator Button —Somebody else might select the potato chip industry. Senator SIDDONS —One could also take the case of ice cream. We will not mention the taxing of ice creams. We could mention many things. We will not talk about an additional sales tax on spanners, either, but we do believe that solar heaters require special consideration. The same arguments could and should apply to slow combustion wood heaters, which by and large are highly energy efficient and use a renewable energy source. The energy problem in Australia and in the world will become great and we should take note of it. The second anomaly we see relates to atlases. The Government is to impose a tax on atlases. There is no additional tax on pornography or on glossy magazines but atlases are to receive an additional tax. Again, we see that as a glaring anomaly. The production of atlases is a very efficient Australian industry and we do not think it should be hit; an additional tax is unfair. I turn now to fringe benefits and entertainment tax. In this area we agree with some of the Government's initiatives and disagree very strongly with others. It is my purpose to outline our position. It is a pity that the Opposition Liberal Party has not done likewise. Nobody knows what it will do in this very important area. Senator Button —Least of all them. Senator SIDDONS —That is right. The first area I want to talk about is the company car. It is the most critical area. I understand that Senator Button walked out of a Caucus meeting-at least, that is the way it was reported in the Press-on this issue. He became very upset about it, I think perhaps rightly so, because it is a very critical area. He would probably be interested to know that the Democrats-- Senator Button —Senator, I have never walked out of any meeting except as a result of boredom. That Press report is not correct. Senator SIDDONS —The senator was misreported; I apologise. I know that special attention was paid by the Minister for Industry, Technology and Commerce to this vital area. He would probably be interested to know that we agree with the Government's formula in this area. We have no objection to it. It gives two options to the employer. We believe that the car is a benefit to the employer and should be seen as representing a tax commitment on his part. In regard to a tax on subsidised rental, again we have no objection to this being the responsibility of the employer. There is no doubt that in remote areas it is necessary for the employer to supply housing at subsidised rentals. It is a part of running a business in these areas. If there is subsidised rental, the tax should be the responsibility of the employer. So we agree with two of the Government's initiatives. We agree, too, that goods and services provided to employees which are part of the output of a business would be very difficult to trace in the hands of the employee and that the tax should be the responsibility of the employer. That logic, of course, could be extended to the case of teachers who receive subsidised school fees for their children. We believe that the logic that applies in regard to the output of an industry should also apply in the case of education, when the benefit gained is an output of the organisation. I now refer to some of the fringe benefit taxes that we believe should be the responsibility of the employee. The first is tax on low interest loans. Such a loan is obviously a benefit to the employee and the payment of tax should be his responsibility. Of course, we believe that there should be no retrospective element. It would be very easy for the Government, from, say, 1 July 1986, to state that any new low interest loans obtained by employees will be taxed. Taxes on goods and services provided by the employer which are not part of the output of the business should be the responsibility of the employee. However, child care facilities, meals provided on the premises and travel for employees in remote areas provided under the terms of an award or employment agreements should be exempted from this general category. Any expenses paid on behalf of the employee should be taxed when in the employee's hands. We think that the Government's formula in this case is reasonable. Senator Watson —You are saying it is reasonable for the employer to pay it? Senator SIDDONS —I am saying that expenses that are paid on behalf of the employee should be taxed when in the employee's hands. I now turn to the very contentious area of entertainment. So far the Opposition has not stated any precise position in regard to what should happen with entertainment expenses. Is it because it cannot make up its mind, because it is not game-what is it? Senator Messner —The Government has not produced the Bills yet. Senator SIDDONS —I would have thought that the Opposition had a responsibility in this. It is a very big area involving a $350m additional tax and as such there is an urgent need for the official Opposition to state its position. The Democrats now do so. We believe that there are three ways in which the question of entertainment expenses can be handled. We agree with the Government that the so-called free meal has been abused. But I point out that the free meal is not strictly free. All that happens is that the company gets a company tax deduction for about half of the free meal, so instead of paying the full cost, it pays half. Senator Button —It is not just the company. It is the relatives and friends; you know them all. Senator SIDDONS —We agree with the Government that there has been abuse and there needs to be a crackdown. There are three ways in which this can be done. Firstly, one can call for substantiation. The Leader of our Party, Senator Chipp, has already written to the Treasurer (Mr Keating) asking whether it would be feasible to initiate a system of substantiation so that legitimate entertainment expenses by business can be assessed and policed. In the event of abuse of that system, very severe penalties could be imposed. We know that there are problems in policing substantiation. Maybe it is not possible to implement this suggestion. We are awaiting the Treasurer's reply. There are ways that it could be done. A statistical sample could be taken continually of the substantiation of the entertainment expenses. If the penalties were high enough, this would probably be the most satisfactory way of clamping down on abuses in the entertainment area. However, if the Government considers that this would not be possible, maybe it could consider the second alternative, which is to put a cap or ceiling on entertainment expenses. We have considered that option. We do not particularly like it. We mention it only because it is an option that obviously the Government could consider. We make this point: While we concede that certain entertainment expenses have been abused and while conceding that it is necessary for the Government to clamp down in this area, we also believe that to go from allowing full deductibility of entertainment expenses to saying suddenly that no entertainment expenses will be allowed is to go from the sublime to the ridiculous. It is nevertheless a very drastic new approach and we submit that there should be a transition period. A suitable transition period could involve 50 per cent of the entertainment expenses being deductible for the first year, with the deduction being phased out over a five-year period, until it reaches the Government's proposal of no deductibility. In effect we are suggesting that the Government could well consider a five-year transition period which would encompass the objective it wishes to reach and the present position. Senator Button —Like a weight reduction program for businessmen. Senator SIDDONS —The option is to put enormous pressure on the restaurant industry. We are concerned about that. It puts enormous pressure on the hotel industry. Of course, it opens the door to abuse of the system, which is already being touted around the country. For instance, if one suddenly cracks down on a system unreasonably, people will be stimulated into finding ways of getting around the system because they think they are being unfairly treated. I understand that already some Queensland hotels report room occupancy rates of 120 per cent. They say to people: `Buy a meal here. We will book you into a hotel room which, of course, you won't want, but you can claim it as a travelling expense'. In fact, all that the person receives is a meal. That is just one scheme that is currently being used. Hundreds of others are being talked about. I make the point that it is not unreasonable to have a transition period. Quite frankly, the Democrats have to look at this matter very seriously. By whatever reckoning one wants to do, there is $300m-odd additional tax on industry, on small business. I hope that I have outlined in some detail the Democrats' position on the tax package. I reiterate that it is a position that was not arrived at lightly. We have wrestled with this problem for 12 months. Senator Messner —Oh, terrible! Senator SIDDONS —It would be a great help to everybody concerned if the Liberal Party could do something better than say, as Senator Messner did in the memo, as was pointed out yesterday: `We are going to oppose the capital gains tax but we have to be careful because if the capital gains tax is defeated there could be a double dissolution and the Democrats would benefit from that. Therefore we will get some people to cross the floor of the Senate to ensure that the capital gains tax is passed.' If that is not immorality, I do not know what is. I understand that some members of the Senate on the Opposition benches are still prepared to cross the floor on the capital gains tax issue. Members of the Liberal Party can crack hardy. They can make all kinds of funny noises, but we would like to see a few facts. We would like to know what their position is. We are not talking about any other piece of legislation. We are talking about the most fundamental reform in the taxation system that has applied in this country for 40 years. It is a necessary reform, as I started by saying, because without this reform there is no way that the infamous and iniquitous marginal rates of tax on average Australians can be reformed. That matter has to be addressed. The Liberals were in government, had control of both Houses of Parliament for three years and did nothing on tax reform. They initiated at least seven or eight different inquiries into taxation. There was the report of the Asprey Taxation Review Committee, the report of the Mathews Committee of Inquiry into Inflation and Taxation and so on. The Liberals did absolutely nothing about taxation reform. So it has been left to the Labor Government to bite the bullet, and bite the bullet it has. To that degree, we congratulate the Government on its initiative. We are trying to be constructive and helpful. We hope that the Government will take notice of what we consider are very legitimate complaints about its package at this stage. If it is prepared to be flexible, to look at what it is proposing and to take note of very real community concerns, we will get tax reform in this country with a minimum of disruption. That will be a milestone in the development of our society. Senator CHILDS(New South Wales)(12.18) —We are discussing the reform of the Australian tax system, as detailed by the Treasurer (Mr Keating) in September this year. There has been some debate until now about some aspects of the package, particularly the capital gains tax and fringe benefits tax. We have just heard Senator Siddons refer to that. Perhaps I should immediately say that the Government will not introduce a bed tax in Queensland arising from Senator Siddons's proposals. But we are certainly going to pick up the people who have avoided and evaded tax in the fringe benefits area. We will stop whatever rorts they get up to. There is a different government in Canberra now and we will not let people avoid and evade their responsibilities to the Australian community. Unfortunately, the debate from the Opposition has not been effective in dealing with all aspects of the package we have before us and that is reflected in the amendment the Opposition has placed before the chamber. First, I want to deal with the general criticisms. The major thrust of the complaints by Senator Chaney, who led for the Opposition, seemed to be that the Government worked with the Australian Council of Trade Unions in formulating this package. We worked with not only the Australian Council of Trade Unions, we worked with the welfare organisations, business and a whole range of consumer and other organisations. Through that democratic process we evolved the package. That hurts the Liberal Party of Australia and the National Party of Australia because they do not understand what democracy is all about. They do not understand consultation. Senator Chaney went so far as to say that option C was dropped because the trade union movement would not support it. He said: There is no principle in this proposal. There is no decency or justice in it. That remark, coming from a Minister in the Fraser Government, a Government which was absolutely devoid of decency and justice and which performed the greatest rip-off of the ordinary taxpayers that has ever been seen, is certainly incongruous. Senator Parer, the last speaker for the Opposition, attacked the Summit-the democracy and consultation that was involved. The Summit was the precursor of the package that the Government presents before the Senate today. In fact, when we came to power, one of the most important tasks was to restore the integrity of the Australian tax system. We had to ensure that not only would the low income earner have his or her tax burden reduced but also the wealthy few might actually start to pay tax. We make no apology to Senator Parer. He said that we are constantly condemning the rorters and the cheats. In the words of Professor Russell Mathews, the problem was not to get the rich to pay more tax; the problem was to get them to pay any tax at all. That is what this is all about. Senator Parer, in his contribution for the Opposition, which was typical of its approach, started to invoke the family man again. The Liberals, when in opposition, always find the family man. As was indicated by Senator Button earlier, the Liberals are concerned with the family man as if they think they can get the rest of the family to the businessman's lunch, which they so vigorously defend in this chamber in the current situation. They are trying to involve all the people who are in the know in the systems to avoid taxation in this country. When we came to power the tax system was in crisis. Those on low and middle incomes were paying more and more income tax, while for those at the top of the scale payment of tax was becoming a matter of personal discretion. From a study of the factors that are dealt with in the Opposition amendment one can see that the Opposition is still defending exactly the same people who were privileged when it was in government. Under the last Liberal-National Party Government evasion became a relatively simple matter, with broad categories of income being exempt from taxation. Those with control over companies, trusts and partnerships were able to draw high incomes while avoiding tax on their business revenue in particular. The Fraser-Howard years were the golden years for the tax avoider and evader. That is what has happened. We have changed from that system to a new one. This package reflects that change. The failure of the Government in the Fraser period to introduce legislation to strengthen the provisions of the Income Tax Assessment Act until 1981, coupled with the weakening of the Act's enforcement provisions by the High Court decisions, lost billions of dollars of tax revenue. Studies of the tax system have shown that before our reforms it effectively redistributed money from the poor to the rich. The Fraser-Howard Government consistently failed to address that problem. Its failure was the cause of the taxation crisis and that is the failure we have set out to remedy. Indeed, it was that Government's failure that helped the Labor Government. We came to power with the accord between the Australian Council of Trade Unions and the Labor Party, the accord which had been the major reason behind the Government's success. We are very proud of that record of co-operation with the vast numbers of wage and salary earners who are affiliated with the Australian Council of Trade Unions. The accord plus our Party platform set out the guidelines for reform. These are: Firstly, to provide a tax system which is based on the principle of ability to pay-that is, all forms of income are treated equally; secondly, to reduce indirect taxes because of their regressive and inflationary nature; and, thirdly, to reduce high marginal rates for pensioners and low income earners in order that poverty traps be reduced. All of these principles are abhorrent to the Liberal Party and the notion of a tax system based on the principle of ability to pay is completely alien to it. This question has been ignored but it is now being addressed. I remind the Senate of the tax rorts which we want to expose and which the Opposition does not want to think about because they have their genesis in the Fraser-Howard Government. The 1984 Auditor-General's report, which was tabled at the beginning of this year, gives us a picture of the extent of the different forms of undeclared income. According to this report unincorporated businesses understated income by up to 40 per cent in 1984. In the same report the Auditor-General estimated that the $3.5 billion in income earned from dividends and interest was undeclared in 1984. This outright evasion of income tax cost about $500m in lost taxation revenue. As a result, the proposals in option A of the documents before the Tax Summit were adopted and they are the basis of the tax reform package which the Government has formulated and which we are looking at today. I will deal with some of the details. The introduction of the capital gains tax and the fringe benefits tax-the particularly emotional areas about which the Liberal Party has difficulty-will mean that people in business will have the same principles applied to them as are applied to the vast majority of Australians. Earlier Senator Maguire very effectively dealt with the capital gains tax aspects so I will not deal with them any further. We have also increased the prescribed payments system from 10 per cent to 15 per cent. This will ensure that the major enforcement benefits of this system are maintained. Owner builders will now also be required to make prescribed payments. I refer to the negative gearing proposal. Advantages were announced on 17 July this year. There are revenue gains from closing off the negative gearing loophole. I appreciate the fact that some Liberal senators will defend it but it has caused a tremendous distortion in the Australian economy. Some of us who are concerned about industry development want to make sure that we get a much more balanced industry development in future. In the very short time available to me I want to mention a couple of matters that are not in the Opposition's amendment. I think honourable senators can see why. Concessional expenditure has been a very useful form of rebate for only a few people. It has been to the advantage of an elite group in our society. Only 6 per cent of taxpayers were able to claim this rebate because so few people can afford to spend the large amounts necessary on superannuation, private education costs, health care, et cetera. It will be replaced with a medical expenses rebate which will help people who are chronically ill or who have high medical costs not covered by Medicare. This rebate will now provide help for those who genuinely need it instead of a handy tax rebate for the healthy. This is the contrast between our approach and that of the Opposition. Speaking of contrast, we have also made a major assault on poverty traps. This is particularly important because many people living in poverty have faced effective marginal tax rates that are higher than the top marginal income tax rates. Honourable senators should think about that. Senator Parer talked about high marginal tax rates. Like all Opposition senators he talked about the top end of the income scale; his Government did not do anything to try to relieve those poverty traps. We have also removed the income test on rent assistance, so we have substantially increased the amount of income that is disregarded for pension purposes when there are children in a pensioner's family. These measures, plus an increase in the unemployment benefit and many other pensions and allowances, reflect our commitment to helping the poorest and least powerful people in the community. They also reflect our commitment to redistribution and the elimination of poverty. I will talk briefly about one of the aspects that affect the corporate sector. The foreign tax credit system is being introduced because of taxation evasion and avoidance in the corporate sector. However, it will not be introduced immediately; it will take effect in 1987-88. This long lead time will allow companies plenty of time to adjust. Studies in the United Kingdom, the United States of America and Australia have shown that many of the largest companies are paying much less tax than the average and in some cases very large companies are paying no tax at all. A major problem is that significant amounts of income from foreign sources are currently exempt if they are subject to tax in the country of source. Of course that tax is often at a much lower rate. This has led to many companies moving off shore, causing massive job losses as well as tax revenue losses to this country. Senator Crichton-Browne —So what have you done about it? Put up the level of company tax. Senator CHILDS —We have also given companies and their shareholders all sorts of advantages that are quite reasonable and honest companies in this country will realise that they have been advantaged by the moves we have made. We will also make sure that the very largest companies that have gone off shore will pay Australia a fair share of taxation. There are many other aspects of the taxation package with which I was prepared to deal at great length but because I want to make sure that some of my colleagues get a guernsey in this debate, I conclude my remarks. Senator WATSON(Tasmania)(12.33) —Before commenting on the so-called Government's generalised tax reform package I declare an interest in a wide range of matters covered within this so-called package. Therefore, I believe my contribution must have some authority as I am one who is affected by some of these issues. We have to acknowledge that the tax reform package proposed by the Government does very little to reform some of the inequities and inefficiencies of the present system. Admittedly, in some contorted way, it does address some of the problems of avoidance and minimisation schemes. However, I think we all have to acknowledge that the package is alienating the business community on which our economic recovery is dependent. At the same time when one looks at a number of areas one sees that the Government has displayed an amazing inconsistency of principle. The disallowance of valid business expenditure-I repeat `valid business expenditure'-for entertainment expenses has had an immediate and drastic direct and indirect effect on employment and the viability of many small businesses involved in the hospitality industries. Nobody can argue that the rorts in the present tax system do not need to be removed but to blanket all business expenditure in this category is taking things far too far. There must be some way of determining what are genuine business expenses and what are pure entertainment or perks. I believe that the so-called mild capital gains tax has lulled the non-business community into a false sense of security. However, the very existence of this tax has already reduced the potential value of present business because subsequent sale will be hit by the tax at full marginal rates. Capital gains are taxed at full marginal rates in very few countries. I believe that this capital gains tax is but the beginning of a more vicious assault on capital. It is but the first foot in the door of more comprehensive schemes that will follow should the Labor Party be re-elected to government at the next election. Anybody purchasing or starting a business from now on will lose virtually one-half of the business goodwill to the tax gatherers. This will have a devastating effect on their retirement income and on new job investment. Senator Durack —Senator Walsh does not know what that is. Senator WATSON —He would not have a clue. I had a pathetic call today about a matter which resulted from the Government's last tax package. A part time worker on $9,000 a year said to me: `I pay 26c in the dollar as tax on my ordinary income but 30c on my lump sum superannuation payment'. He said: `That can't be right, Senator'. I said: `Blame the Labor Party-that was part of its first reform package'. This is the effect that some of these reforms are having nowadays on small people in the community. I believe that the Treasurer, Mr Keating, has failed in his duty not only to the small people to whom I have referred but also to the business and investing communities, to ensure, for example, that the capital gains tax legislation is available for scrutiny now. It is not available. We have had only a very woolly statement. Leading business advisers have already reported that the lack of detail about how the proposed capital gains tax will operate is having a significant adverse effect on investment decisions. The stock market might be doing well at the moment but is that the way in which new wealth should be created in Australia? It is quite ludicrous that a tax, which will take effect from 19 September 1985, has not yet seen the light of day and will not be introduced until the autumn session of Parliament next year. What sort of certainty will that create in the minds of business people? Mr Keating is well aware of the adverse impact uncertainty surrounding the operation of a capital gains tax would have, yet he has failed to have this legislation drafted expeditiously. The form and the details of the tax should have been exposed to critical public discussion and comment before the enactment of legislation and certainly before the tax is imposed. The Government's so-called reform package has already threatened thousands of jobs around the country and has called a halt to business expansion on many fronts. Instead of treating the business sector as an economic partner responsible for generation of wealth and prosperity, the Government is treating it as an adversary, to be hammered and to be squeezed completely dry. It is the wealth generated by the business community that is subsequently redistributed to the whole community through taxation. It is the business community to which this country must look for the creation and maintenance of the great bulk of employment opportunities. Thus, it seems incomprehensible that a tax reform package could have such an anti-business bias. It is not too difficult to predict that the new taxes will result in higher labour costs for employers and, in turn, higher prices and still higher inflation creating a trend which seems now to be irreversible. In spite of the fact that it is the employers who will initially foot the bill for perks for their employees, it is inevitable that the major part of these taxes will be carried by the employees and the consumers. The labour force will press for compensation through direct wage increases or improved conditions in an attempt to maintain the same level of after-tax income. The tax changes are expected to have some serious effects on the private sector and the economy before any of the positive influences that are supposed to be generated by the so-called market reductions in personal marginal income tax rates begin to be felt after September 1986. Some small businesses may be devastated in the meantime. `Reform' means `to make things better by removing or abandoning faults or errors, imperfections or confusions'. There is no way that this can be called a reform package. The fringe benefits tax must be amended to enable industry to achieve its full potential. The move to introduce a capital gains tax and to impose a foreign tax credit system can only mitigate against productive investment-the emphasis is on the words `productive investment'-thereby reducing employment opportunities. In addition, the tax credit system will have an adverse impact on export growth and discourage overseas investment by some companies. Yet, surely export growth is essential if we are to improve our economies of scale, particularly as many companies operating in Australia are constrained by the size of the domestic market. The fringe benefits tax on company cars will destroy the previous rational foundation of the Button plan to protect and promote the Australian car industry. Already several large companies such as the Adelaide Steamship Co. Ltd have stopped purchases and orders for company cars. The Adelaide Steamship Co. Ltd buys between 1,000 and 1,500 cars for its fleets each year and loss of orders of this magnitude will crucify not only the car industry but also the subsidiary companies and specialist manufacturers which supply parts for those major manufacturers. This shortsightedness is typical of the irrational decision making that we have come to expect from this Labor socialist Government which appears to have no coherent or integrated way of formulating policy. It comes up with some good legislation intentions or ideas and then sets about destroying them from another angle. Taxation policy cannot be dissociated from its other policies. It must be seen to complement economic, employment, welfare and family policies. This Government has consistently refused to address the special needs of families with dependent children in its deliberations on tax. It has done nothing to reduce the number of unnecessarily unproductive takers in our society or to encourage an increase in the number of productive givers in society. It has refused to recognise that both entrepreneurial business and the average Australian family should be rewarded, not penalised, for productive effort and responsible savings and investment. To add to this the Government has consistently refused to acknowledge that tax reform and expenditure reform cannot be separated. The major reason that tax reform has become such a pressing issue is because of the tremendous explosion of public sector spending over the last 10 to 15 years. There is no proposal in this tax package to decrease the overall share of government expenditure and, thus, there can be no significant reductions in taxation. The demise of consumption taxes and consequently wage indexation saw the destruction of any reasonable or equitable reform measures. There has been no reform to an unjust system that places an excessive reliance on personal income tax. Debate interrupted. Sitting suspended from 12.44 to 2 p.m. Senator BUTTON(Victoria-Leader of the Government in the Senate) —by leave-Mr President, I inform the Senate that the Minister for Foreign Affairs, Mr Hayden, leaves today for official duties in Papua New Guinea. He will return to Australia on 10 November. During his absence, the Minister for Resources and Energy, Senator Gareth Evans, will be Acting Minister for Foreign Affairs. Senator CHANEY —I address my question to the Minister representing the Treasurer. It follows my question of yesterday, when, in response, the Minister for Finance said that he did not think the 3.8 per cent wage rise would affect the value of the Australian dollar. He went on to say that that was just a matter of his opinion. Is the Minister aware that, since then, the Australian dollar has fallen to a record new low on a trade weighted index basis of 60.3, or 10 per cent below the Budget forecast level of 68? To what does the Minister attribute this serious decline in the value of the Australian dollar? Senator WALSH —One of the fascinating attributes of Liberal Party members as apostles of the free market is the way they repudiate the free market whenever it actually operates. The Government decided in December 1983 to float the Australian dollar. That decision having been made, it is inevitable that the Australian dollar will move up and down. The corollary of floating the dollar is that it moves up and down. These apostles of the free market who populate the Opposition benches quickly lose their faith in the free market whenever anyone actually allows it to operate. It rather reminds one of George Bernard Shaw, who said that Christianity was a wonderful idea and what a pity it was that it had never been tried. It is inevitable that a country such as Australia, and particularly a country such as Australia which is a major exporter of primary commodities, both agricultural and mineral, will go through periods, given a free floating dollar, in which the exchange rate fluctuates quite significantly. The Commonwealth's fiscal policy is in place; the policy of allowing the dollar to float is in place. I think that what I said yesterday with respect to the wage case is that the 3.8 per cent award will not surprise anyone who is informed about what is going on in Australia. There may well be people, particularly overseas, who are not especially well informed about what is going on in Australia, at least in the short term, and there are a number of people inside Australia who are not particularly well informed about what is going on in Australia. I can see quite a lot of them directly in front of me, sitting on the Opposition benches. Senator Chaney referred to the question he asked yesterday about the wage case. I answered, honestly of course, that naturally Australia would be less competitive with a 3.8 per cent wage increase than it would if there had been no wage increase. But that, however, is not the real question. The real question is whether our competitiveness would be advantaged or disadvantaged by the centralised wage fixing policy, by the renegotiation of the accord, the agreement for up to 2 per cent discounting in the next national wage case, or whether we would be more or less competitive with the free-for-all deregulated labour market which the Leader of the Opposition advocates and which the same Leader of the Opposition, as Treasurer in 1981, actually put in place. The Liberal Party had its flirtation with a deregulated labour market in 1981 and 1982, at a time of moderate growth-not the very high and sustained rate of growth that has been experienced since this Government has been in office-and what that policy produced was a wages explosion of 11 per cent in one year and 14 per cent in the next year. Taking the 14 per cent figure-a conservative figure-as an indication of what would happen after two years of high and sustained growth, the sort of wage rise that could have been expected in the six-month period would not be the 3.8 per cent that has been achieved because of the award, but 7 per cent or more. That is the sort of difference in international competitiveness that one could anticipate between this Government's policy and the policy of the previous Government. It has been said before, but it obviously needs to be said again, that Australia has regained the level of international competitiveness that applied in 1970 and 1971, in a period when it was known that the Australian dollar was grossly undervalued and when the McMahon Government, in one of the most despicably cowardly acts that any Australian government has committed, caved in, as the Liberal Party always does, to pressure from the Country Party and refused to allow the dollar to appreciate as it should have done and as it would have done if the dollar had been floating. Senator CHANEY —I have a supplementary question. I ask the Minister to address his mind to the question I actually asked him. I note the Government's action to influence the value of the Australian dollar by maintaining a high interest regime. I note that we have a free market. I ask the Minister: Can he say what factors are producing the current serious decline in the Australian dollar? It is presumably not our low interest rates. What are the factors that the Government believes are causing this dramatic decline in the value of our dollar? Senator WALSH —I did address that matter. As I said before, a country like Australia, a major trader and exporter of primary products, must expect that fluctuations in the currency will take place from time to time. I should have mentioned-I apologise for being remiss in this-that a major factor in the decline in the value of the Australian dollar is the wages explosion which Mr Howard ignited in 1981 and the 11.5 per cent inflation rate which this Government inherited from its predecessor. Senator FOREMAN —My question is addressed to the Minister representing the Minister for Aviation. He will be aware of statements by the Chairman of Qantas Airways Ltd, Mr Jim Leslie, to the effect that the Government's decision to have the airline collect airport departure tax would cost Qantas $28m annually. What is the true situation concerning the liability to pay departure tax? Does the Government anticipate legislative action to remove any doubts that may exist? Senator GIETZELT —The Senate will be aware that several years ago the previous Government introduced a departure tax which was collected at the international airports in Australia from all those passengers leaving Australia to go on overseas trips. That tax has continued for a number of years now. The Government, in preparing for the Budget, decided that there would be no reduction in the tax but that, rather than the tax being collected at the airport, it would be collected by the airline operators when the passengers paid their air fares. So the collection of the departure tax by the Department of Immigration and Ethnic Affairs will cease and the responsibility for the collection and payment of the tax will rest with the airline companies. It would appear, based on the remarks made by spokesmen for Qantas, that Qantas believes that the tax will affect its profitability and therefore be a charge against the airline operator concerned. However, what the airline does not seem to understand, and what has obviously prompted the question by Senator Foreman, is that the Government envisages that in the future airlines should be responsible for the collection of the tax from the passengers. However, that will be purely a commercial decision by the airline operator and should not therefore be necessarily a charge against the company concerned. The airline will clearly have to decide whether to increase the fares commensurate with the level of tax imposed or carry the charge itself, but the new procedure will have the effect of considerable savings from the Commonwealth's point of view in terms of the number of public servants who hitherto were charged with the responsibility of collecting the tax at the airports. I do not see any particular substance in the claim made by the Qantas Chairman. It is a matter for him and his directors to decide whether Qantas will increase fares to take account of the tax or economise and pay the tax out of its operating income. Senator WATSON —My question is directed to the Minister for Finance. What are the implications for the Australian economy if the dollar continues to fall or fails to recover from the new record low established yesterday? Does the Minister agree that it is now likely that the price effects of devaluation will exceed the 2 per cent which the Government and the unions have agreed should be discounted from the wage rise at the next national wage case? Is the Government prepared to press for a higher level of wage discounting or is it bound by the Australian Council of Trade Unions to accept an unrealistically low discount which would further dissipate the competitive benefits of devaluation? Senator WALSH —Until recently I thought that mercantilism was just about dead. It is very clear from the tone of the questions being asked by the Opposition that unfortunately it survives and thrives in the Neanderthal reaches of the Liberal Party. This quaint mercantilist derived notion is that the ultimate objective of all economic endeavour is, expressed in modern language, the international tradeable value of currency, or, in the original mercantilist language, in the accumulation of gold. Senator Watson, of course, has clearly failed to appreciate, because the Australian dollar has been devalued very substantially in this calendar year, that devaluation was necessary to correct the imbalances which had developed over a considerable period; an imbalance which received its initial impetus back in the days when Mr Howard was the Treasurer and when he touched off that wages explosion of 13 per cent average wage increases in one year and 14 per cent in the next year, double-digit inflation, double-digit unemployment and so on. The imbalance which was initiated by that experience had to be corrected sooner or later and was corrected this year. Because it has been corrected Australian industry has become massively more competitive than it was previously. As I said in reply to an earlier question, Australian industry has regained the level of international competitiveness that applied in the early 1970s. Senator Watson should remember that the exchange rate has fluctuated, apart from the original fall, quite considerably in the last four or five months. It is fluctuating again now. It would be foolish to assume that yesterday's rate is the rate which will prevail for the rest of the year. As for the effect of the devaluation on the customer price index and the agreement which my colleagues Ralph Willis and Paul Keating negotiated with the ACTU-and I want to take this opportunity of again publicly commending them for their skill in negotiating that agreement-as a result of that agreement the next national wage case rise will be discounted by up to 2 per cent because of the devaluation effect. Until this time the effect of the devaluation on the CPI is of the order of 1.2 per cent, so there is still considerable scope to absorb further devaluation effects between where it is now and when it becomes relevant to the next national wage case in the autumn of next year. Senator Watson and the other yahoos in the Liberal Party might do well to contemplate and ask themselves this question: What country in the world, when it was going through a period of high and sustained economic growth, would have absorbed the effects of a devaluation of the magnitude of the Australian dollar devaluation during 1985, with a 1.2 per cent effect in the consumer price index, and reached agreement on wage discounting of up to 2 per cent? Senator COLSTON —Has the attention of the Minister representing the Minister for Health been drawn to the Industries Assistance Commission draft report on pharmaceutical products? Does the report propose that, for those currently receiving free pharmaceuticals, a user contribution towards the cost of each drug purchased be introduced, together with a special supplement to pensioners of $25 per year to compensate for this contribution? Whilst acknowledging that this is only a draft report which will require public discussion before a final report is released, has the Government given this matter any consideration? Senator RYAN —I am aware that there is a draft report from the IAC on pharmaceutical products. My attention has been drawn to it. The draft report recommends, amongst other things, that pensioners make a co-payment of $2 per pharmaceutical benefit item to a maximum of $50 per annum and that the pension be increased by $25 to accompany the introduction of the co-payment. Consideration is being given to the potential impact of the draft recommendations. The Government has not formed any view on it yet. Senator CHIPP —My question is directed to the Minister for Resources and Energy. Is it true that the Roxby Downs project, which this Government approved on the spurious ground that the mining of uranium 308 was only incidental to the mining of gold and copper, is now in danger of collapse due to the inability of the project to sell its uranium on the world market? Have the Roxby Downs partners requested the Government to lower the minimum price at which its uranium may be sold? Will the Government, in the light of the difficulties being experienced by Roxby Downs, and given continued exploration in Australia for uranium by companies such as the Japanese Power and Nuclear Corporation, give a categorical assurance that no new uranium mines will, under any circumstances, be given export permits? Senator GARETH EVANS —I have seen the reports circulating. I understand rumours have been about regarding the level of the Australian floor price for uranium. I simply make the point in that respect that the setting of any floor price or a subsequent review is primarily a matter for the Minister for Trade. I know that he is monitoring price developments generally in the uranium market to ensure that not only the interests of the Roxby producers in securing market access for the uranium but also those of other Australian producers are protected. That is a situation in respect of which no government decision has been made, but the situation is being monitored quite closely. On the larger question, a decision as to whether the Roxby Downs project will proceed immediately, or after some delay, or not at all, is expected to be made by the joint venturers, I think at the end of the first week of December. No doubt that decision will be made on the basis of the market opportunities as they are perceived at the time, not only in respect of uranium but also of course in respect of copper and gold, which are the other and indeed more substantial deposits in that particular mine. I can give Senator Chipp the assurance that Labor Party policy is absolutely unequivocal on the question of the export of uranium and that, apart from the Roxby Downs project and the two existing mines in the Northern Territory, it is simply not the case that approval will be given for the export of any uranium from any Australian development. Senator BOLKUS —My question is directed to the Minister for Finance. I refer the Minister to recent incidents of financial irresponsibility and mismanagement by the Northern Territory Government; in particular to, firstly, its dealings with hotel consortia and, secondly, its expensive campaign against the handover of Ayers Rock. Does the Minister agree that this kind of financial irresponsibility by the economic cowboys who parade as legislators in the Territory should not continue? Will the Minister urgently investigate the use of conditional grants under section 96 of the Australian Constitution as a means of protecting Australian taxpayers' money? Senator WALSH —I share Senator Bolkus's evident concern about the fiscal irresponsibility of the Northern Territory Government. It was said many times by the previous Chief Minister of the Northern Territory and present member of the House of Representatives, Mr Everingham, that no Territory Government money was at risk in the various commercial projects which have been either expropriated or underwritten by the Territory Government. That is, of course, completely wrong. In the case of Federal Hotels Ltd, which was taken over by legislative fiat of the Territory Government, the Territory Government paid $2.5m as a grant and an extra $2m as a so-called loan without interest, which is not likely to be repaid. In addition, it sacrificed and sunk an enterprise that had paid $2.6m in taxes to the Territory Government in its last year and was on a trend which would have seen it pay $3m in this year. By contrast, under the new management and owners, the Northern Territory Budget for 1985-86 estimates a contribution to revenue of only $44,000. So apart from throwing away $4.5m of Territory Government money on the expropriation of Federal Hotels, the Territory has also forgone revenue of close to $3m. The Territory Government has attributes that are more compatible with those of a banana republic than a Westminster democracy, particularly in regard to the expropriation of property but with this very important difference: When most banana republics expropriate property they make money out of it. The banana republican Government of the Northern Territory expropriated property and lost money. Quantitatively far more serious, however, than the Federal Hotels takeover are the guarantees which have been given to the Yulara development and the Sheraton hotels at Alice Springs and Darwin. It is expected that in honouring those guarantees in the next financial year some $19m will be required from the Territory Budget, and the ultimate losses could be as high as $300m; that is, the exposure of public funds because of the actions taken by the Territory Government could be as high as $300m. Given that in recent years the Commonwealth Government has provided between 80 per cent and 85 per cent, in round figures, of the total finances of the Northern Territory, this matter is, of course, of considerable concern to the Commonwealth. An associated matter of very considerable concern is the magnitude of the guarantees which the Territory Government has given and the degree of financial risk to which it has exposed Territorian citizens and taxpayers. Senator Bolkus's reference to section 96 of the Constitution is a matter for the Treasurer. I will refer that section of his question to the Treasurer. However, as Minister for Finance, I will also ask my Department to investigate what, if anything, can be done to endeavour to make the Territory Government behave in a more disciplined and responsible manner. As for the advertising campaign being conducted by the Northern Territory regarding the handover of Ayers Rock, the Territory Government is spending some $300,000 of taxpayers' funds on it. If that sum were to be converted at the same per capita expenditure into a Commonwealth campaign it would be something in excess of $35m. I can imagine the howls of outrage which would come from the Liberal Party if the Commonwealth Government were to spend $35m on an advertising campaign of that type. But that figure is the per capita equivalent of the advertising campaign the Northern Territory is running. Apart from the fiscal irresponsibility of that campaign, there is an important moral question. The campaign represents a disgraceful attempt by the Territory Government to incite racial hatred and prejudice in Australia. The PRESIDENT —Order! The Minister is now debating the issue. I ask him to bring his answer to a conclusion. Senator WALSH —Predictably, the campaign is supported by the Premier of Queensland who- The PRESIDENT —Order! I ask the Minister to resume his seat. Senator KNOWLES —I refer the Minister representing the Treasurer to an answer he gave yesterday at Question Time that no reassessment of Budget forecasts has been carried out, in light of the much lower than forecast value of the dollar, and that he saw no point in conducting such a reassessment. Is it correct to assume that a review of the currency forecast and its implications for other Budget projections would form part of his Department's normal mid-year review of the Budget to be conducted in a few weeks time? If so, will he undertake to release the review, in light of the growing concern that major Budget forecasts may be discredited by the renewed fall of the dollar? Senator WALSH —The joint economic forecasting group is due to meet, I think, before the end of this month. I shall check to see whether that is precisely correct. I expect that the report of that group would be considered by the Government early in the new year and a review would probably be completed in February. I will consider whether to make the results of that review available at that time. Senator GILES —Will the Minister for Veterans' Affairs outline the modifications that have recently been made to the Veterans' Entitlements Bill? In particular, will he explain why the Government decided not to proceed with the so-called 40-year rule relating to future grants of war widows' pensions? Senator GIETZELT —The previous Government appointed an advisory committee to examine the existing repatriation Acts-some 80 of them-for the purpose of bringing in a rationalised single piece of legislation, and these are now embraced in the Veterans' Entitlements Bill. The process of consultation resulted in a draft Bill being presented to the Senate on the last day of the autumn session. Since then, there has been extensive dialogue, discussion and consultation with the veterans community. This Government continued the process begun by the previous Government in the compilation of that legislation. Some main issues in the original draft have been modified. Clause 119, which relates to the standard of proof, has been modified to meet the misunderstandings that developed after the presentation of the draft Bill. After consultation between the Government and the veterans community, the 40-year rule which related to war widows' pensions has been completely withdrawn as an act of concession. Cover has been extended to certain veterans who went to Vietnam and who were not previously covered. I refer to those who served on the support ships associated with the transference of Australian servicemen to Vietnam. Cover has also been extended to serving personnel whom the Minister for Defence declares to have undertaken hazardous duties, and medical treatment will be extended to all service pensioners in receipt of a 50 per cent disability pension. Overall, I think that there is now a measure of acceptance of the legislation by the veterans community. I am hopeful that the consensus that has been reached will ensure the speedy passage of the legislation. Senator LEWIS —I ask the Minister for Education whether it is a fact that the Department of Immigration and Ethnic Affairs has reneged on the agreement to continue to provide student accommodation at the Phillip Hostel, Maribyrnong, after the end of this year. What action has the Minister taken, if any, to provide affordable hostel accommodation for 1986 and thereafter for Victorian country students studying at the Footscray Institute of Technology, the Melbourne College of Advanced Education and the Royal Melbourne Institute of Technology? Senator RYAN —It is the case that accommodation that was to be made available to tertiary students in Victoria by the Department of Immigration and Ethnic Affairs no longer will be available. The reason is that the Department of Immigration and Ethnic Affairs needed it for its own purposes. The Minister for Immigration and Ethnic Affairs has advised me that following a comprehensive review it was decided to rationalise the migrant centre network across Australia. Senator Lewis —What does `rationalise it' mean-close it down? Senator RYAN —Certainly the phrase in Senator Lewis's question about reneging on an undertaking is entirely wrong. The accommodation was only ever made available on a temporary basis and it was understood by all parties concerned that when the Department of Immigration and Ethnic Affairs needed the accommodation it would be resumed by the Department for that purpose. There have been further discussions between Mr Hurford and the Victorian Government about other accommodation that could be made available, but that particular accommodation is no longer available for students and will be used by the Department for its own purposes. Senator LEWIS —I have a supplementary question. The Minister failed to answer my question, which was: What is she doing about providing some accommodation for those students? Senator RYAN —It is not entirely the responsibility of the Commonwealth Government to provide accommodation for tertiary students. Some funds made available to tertiary institutions under the States Grants (Tertiary Education Assistance) Act are devoted to that purpose. That takes place when institutions have put up accommodation proposals, those proposals have been endorsed by the co-ordinating body in the State and, finally, have had recommendations about funding made in respect of them by the Commonwealth Tertiary Education Commission. No such procedures have been gone through in the case of these particular students and it is not the particular responsibility of the Commonwealth to act in these matters. Senator CHILDS —I ask the Minister representing the Treasurer what protection exists at present for those bank customers who are disadvantaged by inadvertent machinery failure during the course of electronic funds transfer? What steps are being proposed to remedy any disadvantages suffered by those customers? Senator WALSH —In June last year the Government established a working group of officials, chaired by an officer of the Treasury, to look at this question to see whether more formal arrangements, possibly including legislation covering the rights and obligations of users and providers of electronic funds transfer systems, were necessary and, if so, the scope of such arrangements. The group first met on 9 August last year and held discussions over a six-month period with a wide range of users and providers of the service-financial institutions, consumer bodies and retail organisations. As a final stage in that process the working group met with representatives of the State and Territory governments and over the following months written submissions and comments on the particular issues were received by the group. The working group's report was forwarded to the Treasurer on 21 October. The Treasurer believes that it would be inappropriate to comment further on the form of regulation of EFT systems until consideration of that report has been completed. It can be said that the question of bank customers' rights in the event of machinery failure was one of the issues canvassed by the report of the working group and I am advised that that is the subject of a recommendation contained in the report. Senator CRICHTON-BROWNE —My question is directed to you, Mr President. I refer you to the model display of the proposed interior of the Senate chamber in the new Parliament House, which you were gracious enough to display in your office. I understand that there are divergent views among senators as to the merits of the presently proposed design. Are you in a position to contemplate giving an undertaking to the chamber that the report of the Joint Committee on the New Parliament House will be tabled in the chamber so that senators may provide the Parliament House Construction Authority and that Committee with their views and deliberations prior to the design becoming a fait accompli? The PRESIDENT —I can tell the honourable senator that the matter he has raised was the subject of discussion at a recent meeting of the Joint Standing Committee on the New Parliament House, when a decision was taken that a report should be prepared by the Committee secretariat for presentation to the Speaker and me with a view to the ultimate presentation of that report to both the Senate and the House of Representatives. I am given to understand that the report is now in the course of being finalised and should be made available to the Speaker and to me either this week or early next week. Subject to the Speaker and me agreeing to the contents of the report, as soon as we finalise that we will see that it is made available for the benefit of honourable senators and members of the House of Representatives. Senator VALLENTINE —I address my question to the Minister representing the Minister for Defence. I refer to his reply yesterday stating that `data derived from the Geosat has only indirect application to the Trident II program'. Is the Minister aware of the statement in congressional document PE 351 which describes the Geosat tests under the defence mapping support program as providing `a satellite system for observing geodetic information which will increase the accuracy of advanced submarine launched ballistic missile systems by reducing error sources'? It then states: The secondary mission of the satellite is to provide oceanographic data to aid in the location and definition of ocean thermal boundaries to support ASW (anti-submarine warfare) operations. Given that the only advanced submarine launched ballistic missile system being tested is the Trident system, does not this quotation from the document directly contradict the Minister's statement in the Senate yesterday? Senator GARETH EVANS —No, it does not. I am familiar with the document from which Senator Vallentine quoted, congressional document PE 351. It refers to two particular uses, a primary and a secondary one. Both those references are to military uses in the way that Senator Vallentine described. It is the case, as I said yesterday, that that document is essentially an advocacy document seeking funding for an arm of the United States military and does not attempt to put the Geosat program in its wider context. Looked at in its wider context, the reality of the matter is that the Geosat program has all sorts of civil applications of the kind I spelt out before. The military applications are properly described in the way I described them yesterday as not being the primary ones. There is no contradiction and I stand by the answer I gave. Senator DURACK —My question is directed to the Minister for Resources and Energy. I refer him to the irresponsible and indecent haste with which the South Australian Government is this week pushing through legislation which breaches the gas contract with the Cooper Basin producers, applies impossible supply requirements which place producers in continual breach of their indenture agreements, and applies punitive fines of $1m per producer and up to $100,000 a day. I ask the Minister: Are he and the Government concerned about the adverse impact on the Australian dollar, on interest rates, and on the international investment reputation of Australia as a result of this irresponsible action of the South Australian Government? If so, what action has the Government taken or will it take to dissuade the South Australian Government from its course of action, as the Federal Government did earlier this year when the Western Australian Government was threatening to repudiate the North West Shelf agreement? Senator GARETH EVANS —For a start, the Western Australian exercise was not one of threatened, attempted or any other kind of repudiation. Moreover, the matters in issue there involved an export project and, as such, one in which the Commonwealth had a major and very direct interest. As a good States' righter, as Senator Durack alleges himself to be-not with much supporting evidence on occasions like this, if he thinks there is a political bone to be pointed-he would appreciate that there is very little, if anything, the Commonwealth could appropriately do in the context of the particular brawl that is now well and truly under way between the South Australian Government and the gas suppliers in the Cooper Basin. There are many dimensions to that controversy. There are many points of view that could be adopted about the respective positions of the parties to that negotiation. Clearly, the simplest solution all round to the longer term problems of gas supply in South Australia would be for Premier Bjelke-Petersen to get off his high horse in Queensland and accept the viability and sense of a linkage of the gas fields between Moomba and Jackson, thus making possible- Senator Sir John Carrick —Link Albury and Wagga and use two gas fields. Senator GARETH EVANS —That is possible too, and I am delighted to see that Senator Sir John Carrick is maintaining his intense, legitimate and very constructive interest in these matters, unlike the destructive contributions of the kind that we have just heard from the current spokesman on this matter, Senator Durack. Senator BLACK —Has the Minister representing the Minister for Health seen reports in the Brisbane Courier-Mail on Monday, 4 November, in which the Queensland Premier is quoted as saying that the new Australia Card is un-Australian and will be opposed by the Queensland Government as an intrusion into the personal privacy of every citizen? Can the Minister advise the Senate as to the validity of these claims, particularly in view of the fact that the Queensland Government currently sells identity cards and that these cards carry the photograph, name, date of birth and signature of the bearer? Has the Minister also seen reports in today's Brisbane Sun which indicate that the Queensland Justice Minister will soon amend the Queensland Liquor Act virtually to compel young Queenslanders to carry the State Government ID cards? Could this indicate a softening of the Queensland Government's attitude towards the Australia Card as indicated by the Premier earlier this week? Senator RYAN —Far be it from me to attempt to try to explain contradictions expressed by the Premier of Queensland. I think that his fondness for the double standard is far too well entrenched for me to try to unravel it. But with regard to the claim that the Australia Card will be an invasion of privacy, it is the Government's view that there will be no violation of civil liberties in the use of this card. The use of the card will be confined to uses proposed at the Tax Summit-that is, to assist in the elimination of fraud against and invasion of the welfare and taxation systems. As well as there being legislative protection, it must be emphasised that there is no proposal to create an information file on citizens. The Australia Card register will contain only basic identification data which already exists in many forms for use in the legitimate business of government. Individuals will have a right to obtain a printed copy of and/or see on a display terminal at any Medicare office all the data held on them in the register. There will be an absolute right to correct any information which is inaccurate or out of date. By these means it is hoped that the Australia Card will help to remove many of the inaccuracies in existing government data. Various government agencies will have access to that information. Nonetheless, they will not have access to information held by any other government agency without specific legislative authorisation. It is recognised by the Government that no system can be 100 per cent secure. However, it is believed that appropriate security measures are available and will be incorporated to ensure that the scope for forgery of cards and abuse of the system is limited. Card holders themselves will be protected by penalties applying to such things as forging or counterfeiting Australia Cards and the unlawful use of lost or stolen cards. All things considered, it is my firm belief that in the light of the Government's strong commitments to protecting civil liberties and making the Government more open and accountable, the case against the universal use of national identity system, including the production of an Australia Card for taxation and welfare purposes, completely lacks credibility. Senator ARCHER —My question is directed to the Leader of the Government in the Senate. Has the Government studied the revised rural income prediction of the Bureau of Agricultural Economics for 1985-86 that shows a decline of 26 per cent on the figure for 1984-85? Does the Government believe that farmers can once again cover such a disastrous decline simply with greater efficiency? Senator BUTTON —I have not studied the document in question. I will refer the question to the Minister for Primary Industry and try to give Senator Archer an answer as soon as possible. Of course, the question has certain implications. The major implication is that the burden of decline in rural incomes is entirely within the control of the Australian Government or governments. Senator Michael Baume —You take credit for making it rain. Senator BUTTON —That is a view which I do not share, and I am sure Senator Archer would not share, although Senator Michael Baume, who is uttering some inane interjections, might take that view himself. Senator Michael Baume —Mr Hawke is taking all the credit for it raining. Senator BUTTON —I will refer the question to the Minister for Primary Industry. I am sure that when he provides an answer it will be much more relevant than some of the interjections that have come from this totally pathetic Opposition which contributes to the debate in that way. Senator COOK —My question is directed to the Minister representing the Minister for Employment and Industrial Relations. In view of the Opposition and industry association criticism of Monday's national wage case decision to restore the purchasing power of wages by 3.8 per cent, does the Government have any projections of what wage increases would have applied had the centralised wage fixing system been abandoned? What happened last time a centralised indexation system was scrapped? In an expanding economy, as is now the case, would the same response be expected? Senator Chaney —Mr President, I raise a point of order. That is a totally hypothetical question. It is based on a totally false premise. There never was a departure from the centralised wage fixing system. Mr President, I ask you to rule the question out of order. In 1981 the wage rises flowed through the centralised wage fixing system. The PRESIDENT —Order! There is no point of order. Senator WALSH —Yes, I am aware of some industry criticism. Senator Cook asked whether the Government had a projection-Senator Chaney could not have been listening at that time-of the sorts of wage increases which would have taken place had there been no centralised wage fixing system or no accord. So far as I know, the Government does not have a projection in any formal way. I will check that with Mr Willis and see whether he has anything to add. However, there can be no doubt, based on previous experience that what would have happened with the sorts of high and sustained growth rates and falling unemployment, which we have had since this Government has been in office, in the absence of a centralised agreement on wage fixing and the accord is that wage rises in a six months period-be it the six months ended in September or, indeed, any six months period in the previous 12 months-would have been very much greater than the 3.8 per cent outcome of the September national wage case. Of course, the reason why history leads us to that conclusion is the abandonment of centralised wage fixing in the middle of 1981 by the Fraser Government at a time when we had economic growth running at lower rates than the rates of growth that have prevailed since this Government came to office. Senator Tate —It was negative. Senator WALSH —No, it was not negative in 1981. In a period of lower economic growth the abandonment of centralised wage fixing, the flirtation with the free market, deregulation of the labour market and all of that produced a wages explosion of 11 per cent in 1981 and 14 per cent in 1982. Based on that experience, one could confidently expect that if that system were prevailing instead of the accord wages for the six months ended in September this year would have increased by 7 per cent or something more than 7 per cent, roughly double the outcome which was actually achieved. That flirtation with the deregulated labour market, as I said, initially produced the wages explosion. Ultimately, of course, it produced double digit inflation, double digit unemployment and the most serious recession the country had experienced since the 1930s. Again, I find it absolutely remarkable that, given that experience, the Opposition has made a decision to resurrect that policy and give us a re-run of the disasters of 1981 and 1982 should it be returned to government. Senator PARER —My question is directed to the Minister for Resources and Energy, who will be aware of attacks on the mining industry in recent days by the Minister for Aboriginal Affairs, in which he said that the Australian Mining Industry Council argument on land rights was a rerun of the position the industry had taken over a decade in a campaign to gain access to farming land and other private land where the landowners had independent control over mining on their land. I ask: Did the Minister for Aboriginal Affairs consult the Minister before he made this incorrect statement? Is it not a fact that landowners, including farmers, do not have control of exploration for minerals beneath the surface of their properties? Why do Aboriginals have mineral rights over and above those applicable to every other Australian? Senator GARETH EVANS —I have had continuing discussions with Mr Holding over the whole question of the Commonwealth's land rights package and the character of the Government's reaction to the campaigns that have been mounted from time to time, most recently by AMIC, against land rights for Aboriginal Australians. I am well aware of the complexity of mining and petroleum laws as they operate in various parts of the country. It is the case that by and large ordinary landowners do not have, certainly mineral rights, or rights of absolute veto over the use of their land for exploration and mining production purposes. What they have a capacity to do is to object to claims by mining companies for such access and to have such objections heard and determined by appropriate tribunals, the nature of which differ in different parts of the country. What seems to be conspicuously overlooked in the mining industry's attack on Aboriginal land rights and, in particular, the preferred Commonwealth model for land rights, is that the rights proposed for Aborigines are in no essential respects different from those presently available for white landowners. If Aborigines make successful claims, through a complicated tribunal process, to land based on historical association or whatever else and subsequently mining companies seek access to that Aboriginal land, it is proposed, under the Commonwealth's preferred model, that there be no absolute veto but that there be a capacity for the Aborigines in occupancy of such land to object, in effect, to the mining company's claims and, in the event of there continuing to be a disagreement, that objection to work itself out before an appropriate tribunal, with the ultimate discretion being vested in the government of the day. That is the reality of the situation. An extraordinary amount of mythology is erected, most of it misleading, some of it quite deliberately so, by elements within the mining industry. As I said yesterday when answering this question, the Government's intention is not to give any particular presumption in favour either of Aboriginal interests or exploration and development interests, as important as each of those interests are in their respective ways for both the dignity and the long term prosperity of this nation. Our desire as a government is to treat each of those competing interests equally, to weigh and to balance them through appropriate machinery, before appropriate tribunals where necessary, and at the end of the day to produce decisions which represent justice for all Australians, not just a particular privileged group. Senator SIBRAA —Is the Acting Minister for Foreign Affairs aware of reports that Dr Alan Boesak, President of the World Alliance of Reformed Churches, has had his passport withdrawn by the South African Government only hours after a court agreed to return his passport? If these reports are correct, will the Australian Government express in the strongest terms its opposition to these actions by the South African Government? Senator GARETH EVANS —I am aware of reports that Dr Alan Boesak, the President of the World Alliance of Reformed Churches and a very prominent and respected anti-apartheid leader, had his passport withdrawn by the South African Government only hours after a court near Capetown agreed to the relaxation of harsh bail conditions imposed upon him, including the return of his passport. As yet these reports are unconfirmed but they are believed to be accurate. When I was Acting Minister for Foreign Affairs on a previous occasion, in August, on behalf of the Government, I made a statement strongly condemning the arrest of Dr Boesak and of 26 other black leaders. It is apparent that in this and other respects the intention of the South African authorities manifestly is, so far from entering into constructive negotiations with prominent black leaders of a kind that has been urged by the business community in South Africa, both English-speaking and Afrikaner, to remove these opponents from political life and from peaceful political opposition. This reaction is to be unambiguously condemned and I unambiguously condemn it now on behalf of the Government. The South African Government's actions demonstrate its continuing intolerance of legitimate political opposition and, by means of detention over an extended period, its determination to intimidate extraparliamentary opposition and to stifle constitutional reforms. Its actions serve only to highlight the inadequacy of constitutional changes to date and seriously undermine the South African Government's claims to credibility when it talks about reform. I look forward to the Opposition continuing to support the efforts of the Government, as it says it is, and continuing also, of course, to support the efforts of our recent appointee, to make the South African Government appreciate the enormity of its actions and to take action to move that country towards some semblance of decency and democracy. Senator KILGARIFF —Is the Minister representing the Treasurer aware that, for the first time, major banks are having to ration home loans because of the Government's interest rate ceiling? Is it a fact that, in order to continue lending to home buyers, banks are offering what is known as a `cocktail' loan in which the borrower is required to take out supplementary loans with interest rates as high as 21 per cent? Will the Government review its policy of maintaining the bank home loans ceiling of 13.5 per cent in view of the fact that it is simply not working to the advantage of home buyers? Senator WALSH —I am aware of reports that banks are rationing home loans. Whether those reports are true, I could not say. But even if they are true, of course it would not be the first time that that sort of thing had happened. As for the second part of the question, the Treasurer made a statement on whether the 13.5 per cent ceiling would be maintained. I do not recall precisely when that statement was made but I think it was about four or five weeks ago. In that statement the Treasurer said that the Government would maintain that ceiling. Senator JONES —I direct my question to the Minister representing the Special Minister of State and the Attorney-General. Has the Minister's attention been drawn to reports in today's newspapers that referred to the blatant gerrymander of State electoral boundaries proposed by the Government of Queensland which effectively mean that the Bjelke-Petersen National Party Government will be able to retain office with only 35 per cent of the vote? In view of this blatant rape of democracy by one Australian State in a bid to keep power in the face of rapidly declining electoral popularity, what action could the Federal Government take to prevent substantial parts of Australia becoming a virtual dictatorship? Senator GARETH EVANS —The gerrymander that has just been announced in Queensland is yet another grotesque demonstration of the quality of respect for democracy in that State. This has been something which has risen in the craw, I would imagine, of all Australians who are committed to constitutional and democratic systems representing proper principles not only of fair play but also of political democracy. The Government's approach to these matters is absolutely clear and I would hope that it is one shared by those on the opposite side, although that is hardly likely in view of the character of the interjections that are coming from some quarters on the front bench at the moment-that is, that one vote one value is the only proper and equitable basis for electoral systems. I note that the plenary session of the Australian Constitutional Convention held in July-August this year also voted in favour of this principle. As to what it is within the Commonwealth's competence to do about this sort of thing, the most immediate need is obviously for some kind of overarching constitutional reform which would apply in Queensland as everywhere else. Such an attempt was made in 1974, but failed-as so often-on the rock of opposition from those opposite, who were not happy about any such principle being written into our Constitution. The issue has arisen again with Senator Macklin's Bill, now before this Parliament. Regrettably, there are a number of technical matters that still remain to be satisfactorily resolved about how one translates the one vote one value principle into effective practical effect, and it may be that the most appropriate way of dealing with Senator Macklin's Bill is to refer it, as has been canvassed in some quarters, to the Joint Select Committee on Electoral Reform for further consideration before it is dealt with in this chamber. But in any event, there clearly is a case for constitutional reform. Hopefully, it will be the kind of reform that will be promoted as a result of the proposed commission on the Constitution-at least, when the acronym is sorted out-that Mr Lionel Bowen has been proposing in recent times. There are other legislative options, not presently on the statute book but which may arise in the context of the passage of some such legislation as the Bill of Rights. The particular Bill that has been introduced in the House of Representatives does not, of course, purport to have direct application to the States, although it allows for some investigation of possible breaches of the principles of the international conventions there set out. I note that the report of the Standing Committee on Constitutional and Legal Affairs that was introduced yesterday went further in that respect, suggesting that electoral democracy was of such fundamental and crucial importance to all other civil liberties that it ought to be separately treated and separately protected. This is a matter about which a continuing debate is possible, but I do not believe that it is appropriate to embark upon that debate in the context of Question Time. It is only appropriate to notice, once again, how outrageous the proposal is that is coming forward yet again from the Queensland Government, and how important it is that those elsewhere in the country who have some continuing belief, however minute, fleeting, transient or flimsy, in the principles of political democracy join together to do something to ensure that the residents of that State will enjoy a greater quality of democracy in the future than they manifestly do at the moment. The PRESIDENT —I inform the Senate that I have received the following letter, dated 6 November, from Senator Durack: Dear Mr President, Pursuant to Standing Order 64, I give notice that today I propose to move- `That, in the opinion of the Senate, the following is a matter of urgency: The need to strengthen Australia's alliance with the United States through an effective ANZUS Treaty and the maintenance of joint defence facilities.' Yours sincerely, PETER DURACK Senator for the State of Western Australia Is the proposal supported? More than the number of senators required by the Standing Orders having risen in their places- Senator DURACK(Western Australia)(3.03) -I move: That, in the opinion of the Senate, the following is a matter of urgency: The need to strengthen Australia's alliance with the United States through an effective ANZUS Treaty and the maintenance of joint defence facilities. The Opposition makes no apology for bringing forward for debate as a matter of urgency, for the third time, I think, in the last 12 months or so, the subject of our alliance with the United States of America and, in particular, the situation in regard to the ANZUS alliance. We speak of it in much broader terms than simply the actual ANZUS Treaty. We do that by adding specifically in the motion reference to the need to maintain the joint defence facilities. There are, of course, the many other aspects of the alliance with the United States which I shall develop during my speech. As I have said, I make no apology, because we are dealing with the most important subject that faces Australia and the most important subject which a responsible government and parliament have to deal with in the course of their work and deliberations-namely, the defence of the nation. There can be no doubt that in the last 12 months there have been grave threats to the future of the ANZUS alliance and the American alliance, and those threats have come from many quarters. In fairness to the Government, I must say that in many respects it has stood up very firmly. At least, the Government's rhetoric has been firm on the subject of the ANZUS Treaty and the American alliance and the maintenance of the bases. But there are many other aspects of the Government's performance and statements which have been made which I think add fuel to the worry that is widespread in the community about the future of the American alliance and particularly the ANZUS Treaty. It is all very well for Senator Gareth Evans to have made statements on the subject, as he will no doubt do again today, as the Minister for Defence (Mr Beazley) has done on recent occasions and as the Prime Minister (Mr Hawke) has done in reaffirming the Government's commitment, but there is an old ditty which says: `I cannot believe what you say when I see what you do'. A number of things that have been said and done by members of the Government, including the Minister for Foreign Affairs, Mr Hayden, I think need to be repudiated. First and foremost of these concerns is the statement by the Minister for Foreign Affairs about a year ago when he talked about Australia exercising leverage in the United States of America because of its hosting of the American bases in this country. It is not surprising that Mr Hayden has less than a warm reception whenever he goes to the United States, and he would no doubt be very happy to accept a domestic portfolio as soon as possible. Secondly, we have had the spectacle of the cancellation of the Sea Eagle exercise directly following the problems with New Zealand. I am not speaking here about the New Zealand problems, which are a separate subject that I will also mention later. I am speaking of what the Australian Government has participated in. There was the notorious MX missile backdown by the Prime Minister, also earlier this year-a repudiation of commitments which had been made by him on behalf of the Australian Government to the United States. I think one of the most serious matters of all was the statement by the Prime Minister on 4 March this year dealing with the cancellation of the annual ANZUS Council meeting when, in referring to the ANZUS Treaty-this is a classic example of Hawkespeak-he said: I am saying it exists but it is not operative in respect of the significant elements of it which had previously been operating and without being exhaustive the trilateral exercises are not operating. That is very helpful to everybody concerned. It has been widely reported both in Australia and abroad as a statement by the Prime Minister of Australia that the ANZUS Treaty is inoperative. A most unhelpful and serious impression has been created. Then we have the activities of the Western Australian branch of the Australian Labor Party led by senators from Western Australia-no doubt Senator McIntosh, Senator McKiernan and others-in the establishment of the Thomas committee in that branch of the ALP, which has been working to reduce the number of visits by United States warships to Western Australian ports. Their object is not just to rearrange or to share the burden, so to speak, of these visits amongst various ports in Australia but to reduce the Australian-American alliance under which we give rest and recreation to American sailors who are playing such an important role in protecting Australia in the Indian Ocean. In relation to that matter-this is another point-we know the attitudes of Victorian Premier Cain and New South Wales Premier Wran, who do not want visits by United States warships to either Port Phillip or Sydney Harbour. These very serious attitudes on the part of leading members of the Australian Labor Party are also giving widespread cause for concern. Another matter of great and very visible concern was the cancellation in July of this year of the annual ANZUS Council meeting. All we had was a visit from Mr Shultz for a bilateral discussion between Australia and the United States instead of the annual ANZUS Council meeting which has been such a notable feature of our relationship with the United States for over 30 years. We have had the failure of the Hawke Government to exercise any effective influence whatsoever on Mr Lange and his Government in their virtual repudiation of the American alliance and the ANZUS Treaty in particular. That has been the most visible and serious threat to ANZUS and the American alliance in our region over this past 12 months. When this matter was discussed in the Senate in debate on a motion of mine in rather similar terms to this about a year ago, we were then facing the threat by Mr Lange-he had only just come into power then-of his Government preventing visits to New Zealand by American warships. He was then trying to indicate that that was not going to affect seriously the ANZUS Treaty. However, we all know now what a very serious impact the persistent action of the New Zealand Labor Government has had on the ANZUS Treaty. Indeed, as the Prime Minister said in that interview in March this year, it is not operating as a trilateral arrangement. Because it is a trilateral arrangement, clearly the Treaty is not operating in the way it had since its inception in the early 1950s. Indeed, when Mr Hawke was asked `Would you say that it is a treaty in name only?' he agreed that that was not an unfair description of it as a trilateral treaty. We have had it bruited abroad by Prime Minister Hawke that, as a result of the New Zealand Government's intransigence on this matter, the ANZUS Treaty is not only inoperative but is a treaty in name only. He may have been talking only about its trilateral aspects but, of course, that goes to the heart of the treaty and it goes very seriously to the future of our defence arrangements in our region. I think there has been a grave dereliction of duty and responsibility by Mr Hawke and by senior Ministers in not doing anything about this very serious problem which has arisen as a result of the New Zealand Government's attitude to the treaty. That is only going to get worse because the New Zealand Government is now threatening to legislate-- Senator Chipp —What would you have done? Sent the Navy over? Sent a few shots across their bows? Senator DURACK —In the same way as Senator Chipp, who interjects, would like this Parliament, Heaven help us, to legislate on this subject-a matter which we may be debating later-the New Zealand Government is now threatening to legislate to prevent visits by American warships to New Zealand ports. It has been made perfectly clear by the United States Secretary of State, Mr Shultz, that if that is done clearly it will be seen by the United States as a repudiation of the ANZUS Treaty by New Zealand. It was announced as recently as the end of last month that the New Zealand Government is going to proceed with that legislation. That has left us all in an enormously vulnerable and serious position, and I would think that the Hawke Government ought to be telling us what it is going to do about that situation and whether it is going to try at the eleventh hour to head off the final breach between New Zealand and the United States as a result of the threat New Zealand is making to the ANZUS Treaty. Finally, in respect of the Hawke Government's misdemeanours in this matter, the last of the catalogue I read this afternoon is that not only has the Hawke Government's attitude to America's strategic defence initiative been less than lukewarm, but it also has clearly given the impression to the United States that it does not favour United States efforts to research this area-efforts which would be so important in ending the nuclear arms race. From the United States point of view, no matter what rhetoric is used, no matter how matey Hawke or the Minister for Defence or the Foreign Minister or the Acting Foreign Minister appear, and I concede genuinely appear as far as the alliance is concerned, it is the actions and inactions of the Hawke Government over the last 12 months which must be perceived by the United States as the actions of a less than effective ally. Clearly these ought to be matters of very deep concern to us all, particularly those who are responsible in the Parliament. There are other concerns about ANZUS; that is, the whole rise and role of the Nuclear Disarmament Party and the statements that Senator Vallentine has been making both before and since she came into the Senate. No doubt she will make those statements again today. She is calling for a winding up of ANZUS and the closing down of the American bases and joint facilities in this country. We have had constant denigration of ANZUS by Senator Chipp and his party. No doubt we will have another example of that denigration from him today when he tries to say that the ANZUS Treaty is not effective and might as well be torn up, which is a complete misreading of the Treaty, a total misreading of the whole nature and breadth of that alliance over the last 30-odd years and a repudiation of the attitudes he used to take when he was a Liberal Minister. Lately we have had-this is a very disturbing development-the report of the Catholic Commission for Justice and Peace to the Catholic bishops of Australia to which they have given some sort of a nod; I do not know what it is exactly. There is a widespread perception that the Catholic Church is calling for the dismemberment of the American bases in Australia. I think it is time that the Catholic bishops of Australia promptly made it perfectly clear where they stand in relation to the extraordinary report they received from the Commission. Clearly, there have been a number of growing threats to this nation, particularly by the Soviet Union. We are well aware and reminded constantly of the Soviet bases in Vietnam, at Cam Ranh Bay and Da Nang, and the fact that the Soviet aircraft operating from those bases could operate directly against Australia. But probably of more concern is the growth of the Soviet Pacific fleet, a matter which I noted to some extent when I spoke in the Senate about a year ago on the subject. I will not repeat what I said then, but I bring it up to date by referring the Senate to a most interesting and important article in the Age newspaper of 4 November. The headline is `US alarm as Soviets boost navy power in the Pacific'. The article points out that an American officer of the Seventh Fleet, in a recent briefing, said that the Soviet Union had about 800 vessels in its Pacific fleet, making it the largest of the four Russian ocean-going naval fleets. The Soviet Pacific command, as it is called, has responsibility for patrolling the South East Asian and Indian Ocean waters as well as the Pacific. The US Seventh Fleet has the same responsibility. There is reference in the article to the recent heavy movement of Soviet warships, including the most modern cruiser, armed with nearly 250 surface to air and surface to surface missiles, which recently passed through the Straits of Malacca, adding to the fire power and strength of the Soviet fleet in our region. In addition, we are aware of the Soviet testing of SS18 missiles in the Pacific in recent times. There is clearly-I do not need to emphasise it any more, I am sure, not even for Senator Chipp and Senator Vallentine-an extremely high level of threat in our region in both the Pacific and Indian oceans. In that scene we, as legislators, and the Government with its prime responsibility as the Executive power in this country, have to ensure that we have the resources to meet, and the allies with whom we can share the burden of meeting, the growing threats in our region. The ANZUS Treaty will remain and hopefully will continue to be the sheet-anchor of our defence. Notwithstanding nitpicking arguments that no doubt Senator Chipp will put about the nature of the obligations under the Treaty, the fact is that it has worked effectively and will work effectively. The United States attitudes to it give us great assurance. I refer the Senate to the 1982 report on the ANZUS alliance, which I have not time to quote, by the Joint Committee on Foreign Affairs and Defence which, very interestingly, quotes on page 38 and subsequent pages, very encouraging views by very senior officials of the United States Government about the way the United States sees the ANZUS Treaty and Australia's place in the world. I refer to one such view. The report states: Mr Stoessel referred to Australia's ties . . . and summed up his view of Australia's strategic position as anchoring `the southern end of the western line of defence in East Asia and the Pacific', and standing guard `over a secure, if lengthy, line of communication between the Pacific and Indian Oceans which was of great value in World War II and would be today in the event of war'. That view describes very clearly the importance of the ANZUS Treaty. We are part of the Western alliance. The ANZUS Treaty is part of it and one of its linchpins. The Treaty is important as the Minister for Defence, Mr Beazley, has recently pointed out and as has the Acting Minister for Foreign Affairs, Senator Gareth Evans, who is at the table, in relation to the exchange of intelligence, the access to hardware and the technical information we receive as a result of our being good partners and in good standing under our alliance and under the Treaty. The joint facilities, the American bases, have played an important role and will continue to play, with disarmament and arms control, hopefully, occurring, an even more important role in the monitoring of any arms control or disarmament arrangements by their surveillance and early warning capabilities and so on. They have had great and will have greater significance. They are vital, particularly when one considers the attitudes of Senator Chipp, Senator Vallentine and whatever her Party is called, and the other party she used to be a member of, the Nuclear Disarmament Party, before it all blew up in her face a few months ago because of the Trotskyites who had been so prominent in it. We now have the attitudes being expressed by the Catholic Commission of Justice and Peace. There is a serious threat to ANZUS. The United States may well wonder, in view of the less than effective Government stance in the last 12 months, where we stand. It is important for the Parliament and the Senate to reaffirm the alliance and the need to strengthen it and to maintain an effective ANZUS Treaty, the American bases and our joint arrangements with the United States in that regard. Senator GARETH EVANS(Victoria-Minister for Resources and Energy)(3.23) —As we tread our weary way through this well worn debate, I think it is appropriate for me to begin my speech with exactly the same words that I used to begin my speech on 27 February in response to a similar motion. It is appropriate to do so because absolutely nothing has changed since 27 February. I said then: It is difficult to understand why the Opposition has brought forward this motion at all, let alone as a matter of urgency. Labor's support for ANZUS is complete and unequivocal. In every contribution to every debate on the subject since Parliament has resumed, and in every answer to every question on the subject, that has been made clear. The Prime Minister (Mr Hawke) has made it clear, the Minister for Foreign Affairs (Mr Hayden) has made it clear, the Minister for Defence (Mr Beazley) has made it clear, and certainly I have made it clear in this place that that is so. All of us have been speaking not just for ourselves but for the Labor Government and for the Labor Party in government. The Cabinet made clear its position back in February with a statement of unequivocal terms and in language which picked up the theme of the review of the operations of ANZUS which was conducted in 1983 and which led the Minister for Foreign Affairs, Mr Hayden, in reporting upon it to the Parliament on 15 September of that year, to say: The review has led us to a firm and unequivocal affirmation of the Alliance as fundamental to Australia's national security and foreign and defence policies. Not only is there no doubt about the Labor Government's and the Labor Party's position on this issue but also there is no doubt whatever that there is complete understanding and acceptance of our position in this respect in the United States of America. The clearest possible statement to that effect was made by the United States Secretary of State, George Shultz, who issued a Press statement on 20 February in terms that bear quotation yet again. He said: I am pleased by the announcement by Prime Minister Hawke of Australia on 19 February that his Cabinet has reaffirmed Australia's support for the ANZUS Alliance and for the full responsibilities that the Alliance entails. We note that the Prime Minister described ship visits and U.S./Australian joint facilities as continuing fundamentals of the Australian/U.S. Alliance relationship. We welcome these reaffirmations of Australia's commitment to its ties with the United States. Again, just a few weeks ago, the President of the United States, Ronald Reagan, speaking at the time that Ambassador Dalrymple presented his credentials, said this: Mr Ambassador . . . your Prime Minister has publicly stated that our relations have never been closer, and I believe that that is truly the case. With this degree of clarity and certainty about the Australian position, the United States' understanding of that position and the strength of the alliance, why is the Senate debating this urgency motion, which calls on us yet again to reaffirm that commitment? About the only thing that has changed since we last debated this matter in February is that the Opposition-the new, dry, tough, rigorous Opposition under Mr Howard's alleged new leadership-is flailing about even more desperately than it was then to find some issues on which it could pretend to be attacking the Government. The Opposition is utterly bereft of ideas and of significant issues on which to challenge the performance of the Hawke Government. The maintenance of the joint defence facilities is not in question, nor are Australia's relations with either of our partners under the ANZUS Treaty. There is, therefore, no issue of substance involved in this urgency motion. Lacking a real issue on which to confront the Government, the Opposition is seeking today to make an issue out of the difficulties which obviously continue to exist between our ANZUS partners and to recycle some tired old criticisms of the Government's approach. But all that the Opposition is doing is giving the opportunity to the Government to point out once again the inconsistencies, the paranoia and the general incompetence in the Oppositions's approach. I think that it is indeed fortunate for Australia's national interests that the Opposition's policies have not been pursued by Australia over the last 12 months. I refer in particular to the strategy in relation to New Zealand, if it can be so described, of Andrew Peacock when Opposition Leader-a strategy of giving ultimatums to that country in the hope, apparently, of bringing it to heel; a strategy, again, it would seem, endorsed by Senator Durack in his contribution to the debate today. He urged that we behave in all sorts of extraordinary ways and in macho fashion to try again to bring New Zealand to heel in the context of the legislation that it is presently planning to implement. That kind of approach is now and would always have been utterly counterproductive in trying to resolve the difficulties which do continue to exist in that relationship. The Hawke Government's commitment to ANZUS is not merely the kind of unthinking reflex that we get from the other side of politics. For the coalition parties, the ANZUS Treaty from its very inception seems to have been a kind of Linus blanket without which they would be utterly bereft of foreign and defence policies of any kind. For the coalition parties, ANZUS has been a substitute for foreign and defence policies. Certainly, it has been a substitute for their thinking about those policies. They know that they are in favour of ANZUS, but they do not seem to be quite clear why, and that becomes perfectly apparent on occasions such as this when honourable members opposite get up for yet another bout of ritualistic tub thumping. Let me tell the Senate why the Australian Labor Party in government is in favour of ANZUS, and always has been. There is a number of different perspectives from which we approach this issue and from which we acknowledge that the ANZUS alliance is important. There are a number of different reasons why we would want to and why we have been striving to keep it intact and effective. The first reason is the traditional perspective of our national security. The argument has been that the ANZUS alliance in this respect gives us a degree of assurance and support in the event of a major attack, that it contributes to deterrence, at the very least, as it complicates the planning of anyone who might be contemplating an attack on this country and, in more immediate and practical terms, that it represents a very significant basis for inputs into our defence arrangements through the co-operative supply of intelligence, technology and personnel through exchanges and in the context of joint exercises. A second perspective from which ANZUS seems to us to be important is one which reaches out beyond our immediate national security and looks at things in a regional context. It is very interesting to quote the remarks of the Singapore Foreign Minister, Dhanabalan, who said in early March this year: Any weakening of the security set-up itself between Australia, New Zealand and the United States would be of concern to us because we see the security of this part of the world as being very closely interwoven and we cannot separate what is happening in the south and what is happening in South East Asia. From the perspective of those in our larger region, there is a sense in which ANZUS assumes a greater importance than its importance merely to the three immediate participants in the Treaty. Perhaps most important of all is the value and utility of ANZUS in the larger world scale, from the point of view of what it contributes to and what it enables Australia to contribute to on the larger world scene. There are a number of ways of putting this particular point. I have put it before in this Parliament and I make no apology for doing so again. In the first place, ANZUS is the vehicle through which Australia demonstrates its commitment to the larger Western alliance. As Mr Hayden put it in 1983 and a number of times since: `Australia is neither neutral nor non-aligned and ANZUS is proof of that'. The importance of that commitment is that it contributes in a very direct way to the achievement-paradoxical as some people continue to find this-of peace and disarmament. As distinct from the approach of mutually assured destruction or the will-o`-the-wisp approach of mutually assured defence, it is only common security, a concept laid out in the report of the Palme Independent Commission on Disarmament and Security issues which has achieved a great deal of recognition and respect around the Western world that offers hope. Common security involve as its very essence the possibility of moving the super-powers, in a way that no other approach to this issue is likely to, towards that downward spiral of divestment of nuclear arms which we all want to see occur. The very essence of the common security approach to nuclear strategy is the existence of a stable and secure network of bilateral and multilateral alliances and treaty arrangements, whereby both the nuclear super-powers can confidently enter into negotiations to abandon that upward spiral of expenditure which they are currently locked into by their present philosophy in the arms race and, rather, embark on the downward spiral of arms shedding which is, as I hope we all acknowledge, the only way we will ever secure ultimate nuclear disarmament. Australia's participation in the ANZUS alliance and the ANZUS alliance itself assumes its place in the larger network of Western alliances, which are in turn, one can argue from this perspective, crucial to the psychology, if one likes, of the process of arms divestment. A second way of looking at the advantages of the alliance relationship in the larger global context is that a side benefit of our participation in those alliance networks in general and ANZUS in particular is that they give us some influence, or clout, with our major ally in the peace and disarmament process in a way which simply would not be the case were we just standing wistfully on the sidelines. The fruits of that influence may be slow to appear and on occasions slow to ripen, but they are there. Australia is a crucially important player on the world multilateral disarmament stage and proved this abundantly recently with the very central role Australia played at the non-proliferation review conference, as well as the continuing role we have been playing in the multilateral arms reduction negotiations in Geneva. The third role that flows from our alliance relationship, although here it is not something flowing directly from anything in the ANZUS Treaty itself, is our contribution to world strategic stability through our hosting of the United States-Australian joint facilities in this country which are specifically mentioned in the terms of the motion before us today. It is a necessary part of the common security approach to which I referred that in the short run, while getting superpowers to the point where they feel that they can confidently embark on a disarmament process, a continued emphasis on deterrence is indispensably necessary, much as we might wish otherwise. There is no doubt that the joint facilities, especially Pine Gap and Nurrungar, with their early warning and verification roles, are a crucial part of the West's deterrent capacity. The point was made again in Mr Hayden's 1983 statement, the relevant passage of which states: None of these activities-- referring to the joint defence facilities at North West Cape, Pine Gap and Nurrungar-- involves a specific ANZUS obligation, and they are in any case bilateral arrangements as New Zealand is not involved. While the agreements establishing the joint defence facilities do refer to ANZUS in their preambular paragraphs, they are not a necessary consequence of ANZUS itself. However, the facilities clearly represent an important reflection and instance of the shared interests which the Treaty embodies, and the Government regards this form of co-operation with the United States of unique value. As the Prime Minister and I have indicated on several occasions recently, the contribution made by the joint defence facilities to deterrence of nuclear war fully justifies any risks that might be seen as arising from our having those facilities in Australia. In addition, the operation of the joint defence facilities gives us some moral standing in the position we intend to take more actively in the United Nations and other international fora in support of arms control and arms reduction. The functions of the joint facilities were fully explained by the Prime Minister (Mr Hawke) in his statement to the Parliament of 6 June 1984. In that statement the Prime Minister said that the joint facilities at Pine Gap and Nurrungar contribute to arms control verification and early warning as well as to effective deterrence. This statement was agreed by the United States Government and is based on our full and complete knowledge of what is done at these facilities. There has been a great deal of mischievous speculation about the possibility that the joint facilities will not be maintained after alleged termination dates which it is said are forthcoming over the next few years. In fact, none of the agreements between the Australian and United States Governments has a fixed date on which it will automatically terminate. The North West Cape agreement came into force in June 1963 for 25 years and will remain in force thereafter unless 180 days notice of termination is given. In the case of Pine Gap, the current agreement entered into force in December 1966 for 10 years and is to remain in force thereafter unless one year's written notice of termination is given by either of the two parties. In the case of Nurrungar the treaty entered into force in November 1969 for 10 years and is to remain in force thereafter unless 365 days notice in writing of termination is given. Therefore, all three of the agreements will remain in force and there is no question of their requiring renegotiation or re-authorisation. Furthermore, there is no question of the Government's support for these facilities being subject to change in the future. In talking about the joint facilities, it must be repeated for the record, as it has been repeated every time that Ministers speak on this subject, that these facilities are not military bases. The Prime Minister said on 6 June 1984-I quote from Hansard: The facilities are not military bases. There are no combat personnel or combat equipments there, no military stores or workshops, no plant or machinery or laboratories for research, development, production or maintenance of any weapons or combat systems of any type. We are happy to host them for their early warning and verification roles, not for their war fighting capacity. The attitude and the policy of the Government in this respect are in quite remarkable contrast to those of the Opposition which wants not only full scale military bases on Australian soil, but also bases with nuclear weapons installed and stored there. That point could not have been more clearly stated than by Mr Peacock in his Press release of 7 August, in which he then complained about the terms of the South Pacific Nuclear Free Zone treaty which in his view operated to ban the installation and storage of nuclear weapons within the zone. The then Leader of the Opposition in that statement chose a date almost 40 years to the day after the bombing of Hiroshima to indicate that support on the part of the Opposition for the installation and storage of nuclear weapons on Australian soil. He was deposed shortly thereafter, but I do not think there is any causal relationship in that regard. There is not much doubt that on this issue Mr Peacock's spirit lingers on. Senator Chipp —Are you opposed to the storage of nuclear weapons? Senator GARETH EVANS —Of course, absolutely and unequivocally. Senator Chipp —Therefore, you will vote for my Bill tomorrow. Senator GARETH EVANS —We will explain tomorrow in loving and elaborate detail why we will not do so, because our credentials on these issues are impeccable and we do not need legislation to prove it. Not only is there no understanding on the part of the Opposition of the foreign affairs and defence issues on which it purports to moralise on occasions like this, nor, as evidenced by that statement of Mr Peacock and many others, is there any sensitivity to the real needs and desires of the people of this country in that respect. For Senator Durack to come forward with this motion today, implicitly critical as it is of the Government, chest beating-- Senator Durack —It is explicitly critical, Senator. Senator GARETH EVANS —Explicitly, then, if the honourable senator chooses to interpret it in that way. We do not, to the extent that we are perfectly happy to see the alliance maintained and strengthened in every possible way; in particular, by the New Zealanders coming back into it and making it fully operative in a way that it is not at the moment. To that extent we have no difficulty in supporting the motion. But to the extent that the motion has been moved at all, it is implicitly critical and to that extent we reject the tenor of the motivation which lies behind it. We reject the chest beating by the Opposition about the alliance. Given the Opposition's record, its understanding and its sensitivity on these issues, for it, through Senator Durack, to move a motion like this today in the terms in which it has been moved is nothing short of barefaced cheek and it ought to be dismissed as such. Senator CHIPP(Victoria-Leader of the Australian Democrats)(3.42) —The Senate is debating a matter of urgency which was brought forward by Senator Durack and the Liberal and National parties which reads: That, in the opinion of the Senate, the following is a matter of urgency: `The need to strengthen Australia's alliance with the United States through an effective ANZUS Treaty and the maintenance of joint defence facilities'. I state that the Australian Democrats will fiercely and vigorously oppose this motion. We will vote against it and call for the Senate to divide on it. I respect the views of Senator Durack, the Liberal Party and, indeed, Senator Evans. I passionately disagree with them. I say this without trying to score any points from Senator Durack's speech. Its assumptions were so naive, its approach, with great respect, so craven to the United States of America, its conclusions so defied logic, that one feels chills run down one's spine when one contemplates a possible return to government of the Liberal Party. When Senator Durack's motion uses the words `more effective' and `to strengthen ANZUS' we assume he means to make it more of the same-namely, more bases, a more secure obligation to the United States, more nuclear installations on Australian soil, or installations that facilitate a nuclear attack, because that is the only way in which the United States would even contemplate changing ANZUS. Senator Durack —Do you think it is effective at the moment? Senator CHIPP —I will come to that in a moment. I say it is a sham. I say it is a useless document except that it places Australia in extraordinary danger for no quid pro quo. My argument is that ANZUS is far too dangerous already. It is a sorry state of affairs that such is the state of Australian politics that the Australian Democrats is the only political party in this Parliament which is prepared to expose ANZUS for what it is-an absolute sham. We go further. We say that not only does ANZUS not give Australia any protection but also that it is a positive danger to Australia. How much more dangerous could ANZUS be? We are already prime nuclear targets. That is not the Democrats saying that; Mr Hawke, the Prime Minister of this country, has admitted it. Mr Hayden has said that we are. More importantly, the Soviets say that we are a prime nuclear target. This country, because of ANZUS, now poses a greater strategic threat to the Soviets than does Western Europe, where nuclear weapons are stationed. It is from Australia that communications, command, control and intelligence to launch the nuclear holocaust could come. The Russians know that in order to knock out the United States these are the facilities that have to be hit first. Australia has to be the first target, even before Europe. We have done that in the name of ANZUS. Yet Senator Durack wants it strengthened and made more dangerous. What have we done under ANZUS? We have given the United States, in the most craven, weak-gutted way, 24 pieces of Australian soil for bases, some of which make us a nuclear target. On some of these bases Australia does not even know what is happening. For ANZUS Australia has allowed the United States unilaterally, unless something is done soon, perhaps irrevocably to tie Australian bases into the United States strategic defence initiative, or Star Wars, program. Nurrungar, for example, is being transformed from part of an early warning system to assisting the United States in trans- and post-attack Star Wars intelligence. The entry of nuclear warships and planes into our ports and cities makes them no less nuclear targets. Australian Labor Party policy on this matter is an enigma to me. I plead with Senator Sibraa, who does take an interest in these matters, which I respect, to explain when he follows me why the Labor Party passionately, vigorously and properly opposes nuclear bombs on Australian soil or in the Australian air but allows them in Australian ports. That is beyond my comprehension. Is there a difference between having nuclear bombs in United States warships tied up in Sydney Harbour, surrounded by three and a half to four million people within 25 miles, and having bombs on B52 aircraft? If there is a difference, it escapes me. Senator Sheil —They don't tell you whether they are loaded with them or not, do they? Senator CHIPP —Of course they do not. If they are so reluctant to tell us that means, quite obviously, that they are, in fact, equipped with nuclear weapons. I suspect that the B52s now flying over Australian soil are in fact armed with at least conventional arms and conventional bombs. As from next year there is a severe possibility that they could be armed with nuclear missiles, and we will not ask the Americans. The Americans are having their exercises over Queensland and the Northern Territory with our permission. The B52 bombers-- Senator Hill —How do you know they are armed? Senator CHIPP —You go back to chasing some lesbian, which you did last week. You do that much more effectively. Senator MacGibbon —I raise a point of order. That is a bit rough. Senator CHIPP —Well, he did. That is all the diminutive man is good for. Senator Hill —Mr Acting Deputy President, I raise a point of order. That remark is obviously disorderly. It is offensive. I do not understand what he means, but it ought to be withdrawn. The ACTING DEPUTY PRESIDENT(Senator Jessop) —I am afraid that I have to admit that I did not hear the interjection and I cannot comment on it. Senator CHIPP —B52 bombers staging through Darwin are meant, according to a private agreement between Australian Foreign Minister Street and United States Secretary of State Haig in 1981, to be unarmed and not to carry nuclear weapons. I cannot get an answer from the Government as to whether the Government has asked or will ask the United States whether these aircraft are armed. In the name of ANZUS, Australia is wasting most of the 2.9 per cent of gross national product devoted to defence on equipment which is not to defend Australia in the region but is to fit in with the United States global foreign and defence needs and objectives, not Australian needs. In the name of ANZUS the Australian Government agreed to monitor the first MX first strike missile tests. Yet Mr Hayden has declared that this Government is categorically opposed to Australia having anything to do at all with first strike weapons or systems. This Government helped the United States in its project to make MX and Trident II missiles more accurate through its involvement in Geosat. I refer to the electromagnetic rail gun. This Government has repeated time and time again its desire to have no part of President Reagan's Star Wars insanity. Yet the United States Air Force is developing this rail gun with our help. Under ANZUS we have helped to develop Navstar, a global positioning system. Australia is involved in the development of Navstar through Tranet Smithfield in South Australia, a system which has enormous military implications. With the Navstar system every guided missile can become accurate to 15 metres. Why does any weapon have to be this accurate? It means that a successful first strike, if that is what is wanted, is highly likely and possible. This is what we have done in the name of ANZUS to protect ANZUS. In the past Australia has not received any guaranteed defence from the United States. Nor have we received any guarantee of defence from the United States in the future. As to a guarantee from the United States, there is none. Senator Durack chided me about this matter but listeners would be interested to learn that he did not allude to my challenge to him. He is a good lawyer and he is now interested in defence. Time and time again I have asked him to state those words or sets of phrases in the ANZUS agreement which obligate the United States to come to our aid if an attack is made on Australia. He did not do so and he cannot do so because they are just not there. But in the name of this sham treaty we have cravenly gone to the United States and made Australia a nuclear target. Let me read the operative phrases in the ANZUS Treaty. I plead with people who are listening to this broadcast to get a copy of the ANZUS Treaty. It will take only four minutes to read it; it contains only 1,200 words. I ask listeners to listen carefully so that they can determine where, if anywhere, America has any obligation to come to our aid if we are attacked. Article 3 of the ANZUS Treaty states: The parties-- that is, New Zealand, Australia and the United States-- will consult together whenever in the opinion of any of them the territorial integrity, political independence or security of any of the parties is threatened in the Pacific. What the hell does that mean? All that means in that if Indonesia is bombing Rockhampton the parties will consult. One telephone call from President Reagan to Prime Minister Hawke would satisfy that requirement of the ANZUS Treaty. Article 4 of the Treaty is just as inept. It states: Each party recognises that an armed attack in the Pacific area on any of the parties would be dangerous to its own peace and safety and declares that it would act to meet the common danger in accordance with its constitutional processes. What does that mean? That means that if, under article 3, President Reagan decided to send troops, aircraft or ships to defend Australia in view of an Indonesian attack, he would have to go to Congress to get approval. Does anybody in this chamber believe that after Vietnam and the other fiascos in which the United States has been involved, Congress would give President Reagan that kind of support for another war in Asia? There is no guarantee whatsoever from the United States. Since ANZUS is already dead as a tripartite treaty in all but the legal sense, what Senator Durack is proposing in this matter of urgency is a new Australia-United States agreement, minus New Zealand, which would entirely throw away any notion or semblance of Australian national sovereignty. ANZUS has led Australia into 21 treaties with the United States, 55 agreements of not less than treaty status and up to 30 totally secret agreements of which we do not even know the names. Having given all that information, I ask: Will somebody in this chamber please tell me what we have received in return? I could answer the children of this country if somebody said to me: `You in Parliament have made Australia a nuclear target'. I could live with it, almost, if I could say: `Yes, but because we have done that we have made you safe. We have given you protection. The United States will come to our aid automatically if we are attacked. Therefore, although we have made you, the children of Australia, a nuclear target it has been worth while because we have got you automatic protection'. Where is the automatic protection? Will somebody please tell me where it is under the ANZUS Treaty for which we have mortgaged our future and sold our children's birthright? With the imminent collapse of ANZUS and the tripartite agreement and the possibility of a renegotiated treaty, Australia has the opportunity perhaps for the first time to have a full public debate, a national stocktaking of Australia's security interests, Australia's defence needs, and for the first time to act according to this nation's needs and not the needs of other nations. The Democrats look forward to the development of a strong, independent Australia where craven subservience to the interests of any other state will be a thing of the past. Senator MacGIBBON(Queensland)(3.56) —The Senate this afternoon is debating the following matter of urgency: The need to strengthen Australia's alliance with the United States through an effective ANZUS Treaty and the maintenance of joint defence facilities. There are three key points in the motion; namely, the need to strengthen the alliance, the ANZUS Treaty and the joint defence facilities. The urgency of this matter is brought about by the apparently irrevocable commitment of New Zealand to destroying the ANZUS Treaty that has been in existence since 1951. I quote from an editorial which appeared in the Australian of 4 February this year. The editor of the Australian said: ANZUS is far more important than the rhetorical gestures being made by the New Zealand Government. Everyone would like to be free of nuclear warships-of all nuclear weaponry, for that matter-but this is far from being a perfect world. It is simply not acceptable for New Zealand to destabilise our main defensive pact by going its own naive way. It must be made very clear that the difficulties that we are in have resulted solely from the actions of New Zealand. They do not come from the present Government in Australia; they do not come from the present Administration in the United State of America. The naive actions, as the Australian described them, of the New Zealand Government have affected the security of Australia and the security of the United States. We have a legitimate right to put our point of view to the New Zealand Government as to the consequences of its action. Regrettably, the Australian Government has not used the opportunities that it had to put to the New Zealand Government that responsible point of view with respect to our security. New Zealand in the past has been quite happy to be an equal partner in what is essentially and absolutely a tripartite agreement-an agreement of three equal partners. This Government has done nothing at all to look after our essential interests with respect to the waywardness of New Zealand. What does ANZUS provide? Senator Chipp has expressed his view. I would like to answer the question that he repeatedly asked of the Senate: What does ANZUS provide? ANZUS had its origins in 1951. The world in 1951 was very different from the world in 1985. The ANZUS Treaty was drawn up only five or six years after the end of the Second World War. At that time Japan was the defeated power in the Pacific and the United States was the dominant power. Since that time we have seen a very great change in the standing of nations of the Pacific region. However, then, as now, ANZUS was often misrepresented as a defence alliance between Australia and the United States with Australia playing the part of a defence groupie. It was argued that in some way or another Australia's essential interests were subsumed to some sycophantic support of the United States. People such as Senator Chipp still believe that that sort of situation exists. Of course, that is not true at all. I would like to quote from a speech that the present Defence Minister, Mr Beazley, made to the Fabian Society of New South Wales earlier this year in which he tackled this very point. He said: It was, of course- speaking of ANZUS- a fact that Australia and the United States shared, and continue to share, many important interests in South East Asia and the South Pacific. We both wish to see the development of prosperous, stable, resilient and open societies throughout our region. That situation conveys the truth as to the relationship, as equal partners, between Australia and the United States. There is one further point that is relevant to ANZUS. When the Labor Government came to power in March 1983, one of its very first tasks was to examine the ANZUS agreement and come up with, in its view, a complete review. This was completed about the middle of 1983. The Prime Minister (Mr Hawke), the then Minister for Defence and the Minister for Foreign Affairs (Mr Hayden) all unequivocally supported ANZUS. I quote from another speech to the Fabian Society-they must be very interested in defence-by the present Minister for Foreign Affairs, Mr Hayden, in which he said: The great value in the ANZUS arrangements is that they have continuing relevance for Australia's security in present and prospective circumstances. What does ANZUS provide? Senator Chipp is always saying that the United States just has to get on the phone, because that is all that Article III provides-that the parties will consult. But, as Senator Durack said, Article IV is the key article. Article IV says quite bluntly: Each Party recognizes that an armed attack in the Pacific Areas on any of the Parties would be dangerous to its own peace and safety and declares that it would act to meet the common danger in accordance with its constitutional processes. It is absolutely wrong for Senator Chipp to claim that all that is required is a phone call. Such a statement is a statement of naivety in international relations. There is no such thing as a treaty or alliance which involves automatic and unconditional commitment by either party in the use of armed forces in support of the other. No treaty like that exists in the world. The United States, in the past, has told its partners in the North Atlantic Treaty Organisation that that is a fact of life in relation to the NATO agreement. But it also is a fact of life that no great power can ignore or betray the reasonable expectations of its treaty partners. There is no evidence that the United States will take a negligent view with respect to its responsibilities under this treaty. Treaties are not merely scraps of paper. Treaties do influence the foreign policies of government. The ANZUS agreement has influenced Australia and has influenced New Zealand, and it influences the United States, in the conduct of their foreign policies. So let us have no more of this nonsense that ANZUS does not mean anything. When we talk in the motion about strengthening ANZUS, we are not talking about the diplomatic side of it alone; we are talking about strengthening its military capacity. We want to see Australia do more to look after its own defence, because that obligation is very much on us in the light of the Guam doctrine of President Nixon, which was laid down in the late 1960s. In essence, the Guam doctrine means that unless a nation is prepared to look after itself and make a reasonable commitment to its own defence, the United States is not prepared to help it. So it is very much part of the Opposition's view, on this motion, that when we talk about strengthening the alliance we are not talking about diplomacy alone; we are talking about strengthening the military capability. I should like to refer to a curious aside of the Foreign Minister in that Fabian speech to which I referred previously. He said that Australia was getting defence through ANZUS on the cheap; it was getting defence for about 2.8 per cent of its gross domestic product. That is a most unusual, most curious and most unprecedented justification for a defence alliance. But Mr Hayden went on to say that if we did not have ANZUS, we would have to commit about 5 per cent of our gross domestic product to defence to get an equivalent level of protection. Even if we went to 5 per cent, we would be considerably below the figures for defence spending of the countries of the Association of South East Asian Nations, the nations in our region. For comparison, I throw up a few figures. Australia can put only 75,000-odd men and women into the field in defence of this country. Little Singapore, with about a sixth of our population, can put in over a quarter of a million. Indonesia, our nearest neighbour, has over 363,000 men. Malaysia, which has about the same population as that of Australia, can find over half a million men. So we can see that the contribution Australia makes to its own defence is miniscule and quite inadequate. But ANZUS has values, both direct and indirect, for Australia. One of the indirect values is that no attacker of Australia can evaluate precisely the level of the United States response. Another great indirect value is that ANZUS is a stabilising factor in the relationships of the region. The ASEAN countries respect and support the ANZUS agreement. The direct benefits to Australia are many. There are the intelligence benefit; access to latest technology; joint exercises with the United States, which are enormously important to us now, given the great cutback in operational funding under the meagre defence budgets of this Government; and the logistic support. Let honourable senators not have any doubt about the value of that logistic support to Australia. The United States is the only country which, through thick and thin, will provide the weapons and material for Australian defence forces without references to our political situation, as we found out very sorely with respect to the French, the British and the Swedes when we were involved in the Vietnam war. Why do we need to reinforce ANZUS at this time? We need to reinforce ANZUS because this region is no longer as stable as it used to be. There are potential problems in our region. Only today in the newspapers there are several articles about the major increases in Soviet activity in the Pacific region-the growth of Cam Ranh Bay and the development of the Soviet Navy there. The biggest fleet of the Soviets is now in the Pacific. The Soviets have a bigger fleet in the Pacific than does the United States Navy. I refer to the air deployments at Da Nang in Vietnam and the diplomatic activity in places like Kiribati with the development of fishing ports. All these things reinforce the increased activity of the Soviets in our sphere of interest. Since the Soviets and their supporters on my left in this chamber have no historical interest in this region one is entitled to ask: Why are they there? Are they there for a suntan, or do they like the seafood cocktails? I have my own view on the matter. A great deal of instability is developing in the region. We have the strange views of the New Zealand Government and the troubles in New Caledonia and the intransigence of the French Government with respect to the development of a new state there. We have the accreditation of the Cubans to Vanuatu, the border problems in Papua New Guinea, the failing days of the Marcos regime in the Philippines and the uncertainties that can come in Indonesia when President Suharto finishes his long and honourable term. All of these things lead us to have grave conserns about our future. Those fears are reinforced by some of the actions of the Government. I have no doubt about the integrity of Mr Hawke, Mr Lionel Bowen, Mr Beazley, many other members of the Ministry and the majority of members-- Senator Gareth Evans —And me. Senator MacGIBBON —And Senator Gareth Evans-with respect to their support for the American alliance. But one has to recognise that members of the largest faction, insofar as factions can be mapped in that changing game of Labor Party relationships, are trenchantly opposed to the ANZUS alliance and want to pursue an anti-joint defence facilities line. They are xenophobic, isolationists, unilateralist, pacifist, and all sorts of things. The views of these people are known, and they prejudice the good name of the more responsible members of the Labor Party. We had the dreadful debacle of the MX promise being broken when, after the Prime Minister promised to support the testing of that weapons system, the left wing made him back down. We have had the inability to deal frankly and firmly with New Zealand on its illogocal actions, the tacit and the active financial support for the peace movement, and the change of the venue of the Pacific Area Defence Exhibition from Sydney to Darwin. All these things detract from the credibility of the Labor Party. I can assure the Labor Party on behalf of the Liberal Party and the National Party that, insofar as it is concerned about the defence of this country, it has the full and unqualified support of the Opposition. Finally, we come to the joint defence facilities. As Senator Evans said, they are concerned with surveillance. They have no war fighting capability. Yet we have all this fear campaign drummed up by Senator Chipp and his fellow travellers, resulting in the belief that the facilities make Australia a nuclear target. The illogicality of their case does not weigh heavily with them at all, but the fact is that if one is in a war the first target is the arms of your opponent, not intelligence-gathering facilities. In the event of an open war between the United States and the Soviets we would face the terrible effects of a nuclear winter, so it would all become irrelevant. There is no isolationist course open to Australia. There is no safety in the Chipp-style neutrality, the craven cowardice of trying to hide under the bed when the thunderstorm is going on. Senator SIBRAA(New South Wales)(4.11) —The Senate is debating a matter of urgency moved by the Opposition, which reads: . . . the following is a matter of urgency: `The need to strengthen Australia's alliance with the United States through an effective ANZUS Treaty and the maintenance of joint defence facilities'. As Senator Evans stated earlier, the Australian Labor Party does not oppose the thrust of the motion. The Opposition is well aware of this fact as we have debated similar urgency motions earlier this year. If it was an attempt by Senator Durack to embarrass the Australian Democrats it has failed. Their views are well known. In fact, it gave them a platform and I am sure that Senator Chipp welcomed the debate this afternoon. The main problem with the approach of the Opposition parties-that is, the Liberal Party and the National Party-to the United States alliance and ANZUS is their unthinking and uncritical support of United States policies, whether they are good for Australia or not. I have said before that this is the type of thinking that involved this country in the Vietnam war. It is a dangerous type of thinking and it is the sort of thinking that Senator MacGibbon often represents in this chamber. I can think of a number of areas in the field of foreign policy where Australia's interests do not necessarily coincide with those of the United States. For example, it is probably in the best interests of the United States, as perceived by it, that the tension and limited conflict in Indo-China continue. It is certainly not in Australia's best interests. It is interesting to note that Australia's attitude to the region is now much more acceptable to our Association of South East Asian Nations neighbours, particularly Indonesia, than when this Government came to power in 1983. The United States policy of constructive engagement with South Africa is, I believe, not in Australia's best interests. The same applies to a possible peace settlement in Namibia and towards United States policies in southern Africa generally. I am pleased that the United States is finally taking an interest in what is happening in the Philippines after Australia had been warning it about the situation there for some time. These are examples of some policy differences. However, Australia's position was put clearly by the Prime Minister (Mr Hawke) during a Press conference in Washington this year when he said: I strongly put the position that we are not an aligned country which had to agree or did agree with every single aspect of the policy making and decisions arrived at . . . Now that is the strength of the relationship between two great sovereign but allied democracies-that is that you share certain basic perceptions. The Government's commitment to the ANZUS alliance has been reaffirmed several times in the life of this Government and in fact in the life of this Parliament. The National Conference of the Australian Labor Party held in June 1984 carried the following resolution in respect of the ANZUS alliance: Co-operate with the United States and New Zealand within the context of the Australia New Zealand and the United States (ANZUS) Treaty. Recognize the need to ensure that its provisions do not derogate from Australia's right of National decision making in foreign and defence policy matters or its duty to provide for its own security to the extent which its resources allow. Labor rejects and condemns attempts by successive conservative governments to use the ANZUS treaty to justify their failure to pursue an effective and self-reliant defence policy, and their failure to pursue an active and independent foreign policy with the alliance. This Government conducted an extensive review of the Treaty in 1983 shortly after we came to power. I quote the words of the Minister for Foreign Affairs, Mr Bill Hayden: The review has led us to a firm and unequivocal reaffirmation of the alliance as fundamental to Australia's national security and foreign and defence policies. This was re-endorsed on 12 February this year by the Cabinet in a statement which in part said: Federal Cabinet today reaffirmed the Australian Government Policy on the basic issues of the Australia/United States alliance, ANZUS treaty and on disarmament and deterrence. It went on to recognise that the Australian-United States alliance needs to ensure that the maximum possible progress on disarmament is essential to Australian foreign policy. This Government values the benefits which flow to our national and regional defence posture from the Australian-United States defence relationship. We recognise that the defence relationship with the United States helps us to satisfy important national defence requirements. Quite apart from its general deterrent value, which is still sustained by the ANZUS Treaty, our efforts to improve our national defence capabilities and hence our ability to contribute to regional security are greatly facilitated by co-operation in intelligence and defence sciences, the opportunities for combined exercising and the regular exchange of views on strategic perspectives. We view the relationship as one that is important for us both to nurture because of the mutual benefits it brings. Our close bilateral relations with New Zealand also continue to be important. They are the product of historic tradition and shared strategic interest in our region, particularly the South Pacific. Defence co-operative activities with New Zealand, which include combined exercises, personnel exchanges and logistics and defence science co-operation are being maintained and fostered. Members of the Opposition consistently express doubts as to the effectiveness of Australia's present role in ANZUS. Let me quote what the American Secretary of State, George Shultz, said earlier this year: I am pleased by the announcement of Prime Minister Hawke of Australia of February 19 that his cabinet has reaffirmed Australia's support for the ANZUS alliance and for the full responsibilities that the Alliance entails. We note that the Prime Minister described ship visits and U.S./Australian joint facilities as continuing fundamentals of the Australian-U.S. alliance relationship. We welcome these reaffirmations of Australia's commitment to its ties with the United States. Let me now turn to that section of the urgency motion that deals with the maintenance of the joint defence facilities. The Labor Party platform states, in regard to the defence facilities, that Labor will: Ensure that the presence in Australia of foreign or jointly owned, controlled or operated bases and facilities does not involve a derogation from Australian sovereignty. The platform goes on to state that Labor will: Not oppose the use of Australian bases and facilities by allies in war time, or in periods of international tension involving a threat to Australia, or insofar as they are involved with verification of treaties, agreements and understandings on disarmament and arms control, such as the various SALT accords; provided Australian authority and sovereignty are unimpaired; and provided that Australia is not involved in hostilities without Australia's consent. Since coming to office the Government has acted upon its undertaking to provide the public with a statement on the general purposes and functions of the defence facilities we operate jointly with the United States. In a statement to Parliament on 6 June 1984, the Prime Minister set out the functions and purposes of the bases. The Prime Minister explained to the Australian people the role of the facilities and their part in the policy of deterrence. In contrast, the Liberal and National parties when last in power lied to the Australian people about the joint defence facilities and their purpose. The editorial in the Australian Financial Review of 12 June last year put the matter of this deception extremely well. It stated: The most important thing about the statement which the Prime Minister made last week about the U.S. communications bases is that it served, together with comments from the Foreign Minister, to bring the debate about Australia's role in the world power balance into some kind of perspective. The worst thing about the way in which the discussion about the bases have been conducted, and was conducted under the last Government- that is the Fraser Government- was that it permitted and encouraged the Government and the bureaucracy to lie to the Australian people. The last Government lied, by omission, about the bases. The bureaucracy has tried to continue this line even up to the present and has prevented the Government from giving as clear an account of the role of the bases as could have been done. The editorial continued: The real argument then is about the strategy of nuclear deterrence and whether Australia, by contributing to increasing the efficiency of the United States communications and surveillance system, increases the effectiveness of deterrence and so decreases the likehihood of the use of nuclear weapons. The lies and duplicity of both our allies and our own defence establishments and governments in the past have served to prevent proper public debate about this central issue. The Prime Minister's statement emphasised that the joint defence facilities are not military bases. There are no combat personnel or combat equipment there. There are no military stores or workshops, no plant or machinery or laboratories for research, development, production or maintenance of any weapons or combat systems of any type. The facilities we operate at Nurrungar and Pine Gap with the Americans contribute to reliable assessments of military developments and provide for verification of arms limitation agreements between the United States and the Union of Soviet Socialist Republics. Amongst the functions performed are the provision of early warning by receiving from space satellites information about missile launches and the provision of information about the occurrence of nuclear explosions, which assists in nuclear test ban monitoring and supports nuclear non-proliferation measures. Disclosure of other technical functions of the classified facilities would involve damage to both the United States and Australia's interests and cannot, therefore, be justified. The purpose and functions of the joint defence facility at North West Cape have already been made public. It is a communications relay station for ships and submarines of the United States Navy and the Royal Australian Navy and serves as a key element in a complex system of communications supporting the global balance. As indicated in the statement which the Minister for Defence (Mr Beazley) tabled in the Parliament on 3 November 1983, agreement was reached with the United States Government on new arrangements to ensure that the Australian Government would be able to make timely judgments about the significance for national interests of developments involving the North West Cape facilities. These new arrangements are now in force. The Government is satisfied that Australia's sovereignty in the operation of the joint defence facility at North West Cape is now adequately protected. Some honourable senators expressed concern about possible risks to our security from these facilities we host. The Government takes the view that the joint facilities directly contribute to the security we enjoy every day and that this tangible benefit outweighs the possibility that risks might arise at some future time from our hosting the facilities. For many years now our intelligence and defence authorities have assessed the risk of nuclear war as remote and improbable, provided that effective deterrence is maintained. I believe that is what the joint facilities are doing. We do not oppose the thrust of the motion moved by Senator Durack this afternoon. However, we wonder why we are continually debating the same issue. Senator HILL(South Australia)(4.23) —The Senate is debating a motion moved by Senator Durack, the Deputy Leader of the Opposition in the Senate, in the following terms: The need to strengthen Australia's alliance with the United States through an effective ANZUS Treaty and the maintenance of joint defence facilities. A principal responsibility of the government of Australia is to provide for the defence of the Australian people and, to a lesser extent, of Australian interests. That statement might be elementary but, in an environment where the threat scenario to Australia is not easy to predict, it is often forgotten. A threat to Australia is not obvious. We do not feel under threat. We have the advantage of being an island state. We are not physically located in one of the hot spots of the world, such as the Middle East or Central America. It is in such circumstances that the temptation always exists to drop our guard. But our natural advantages in no way allow the Australian Government to abdicate the responsibility to be prepared for the unexpected. We would do well to remember that we do not live in an ideal world. Wars and violent conflicts abound, whether they be for property, power or ideological reasons. We do not live in a free world. Many states are subjugated. The number of true democracies in the world is small. Military dictatorships abound. In such circumstances there is need for vigilance and sound policy. We are raising this matter again today because of the continuing shortcomings of the Labor Government's performance in this area. In the parlance of these matters, we are referred to as a middle power. We are an industralised nation which is technologically advanced but we do not have a large economy. We have a small population and, geographically, we have a huge area to defend, with widely dispersed population centres. This nation is therefore difficult to defend. Because of its democratic nature there is a continuing clash of priorities for the limited funds that are available for defence purposes. Our military capacity is therefore limited. Because of that limited capacity, we have defence alliances with other democratic nation states with value systems similar to ours. It seems to me that entering into alliances is both theoretically and practically a wise step for the Australian Government to take in meeting its defence commitment to its people. I find it particularly difficult to understand Senator Chipp's arguments against the desirability of defence alliances for a country such as ours which is not militarily powerful. The most important of those alliances is ANZUS. It is through ANZUS that we link into the whole wider net of the Western democratic defence alliances. I have argued before that ANZUS is only as good as the relationship between the parties involved. When it comes to the crunch the parties do not look to the letter of the treaty or an alliance. As we know, that is the challenge of academics, theorists and, in retrospect, historians. Come the crunch, the reaction of the parties depends on the spirit of the agreement, the strength of the relationship and the strength of the value systems upon which it is based. This is what I argue is so important. If we ever need to call upon our alliance partners, we will want to rely on more than simply a document. It is the spirit of ANZUS which has all but been destroyed by the New Zealand Government and which the Australian Government and the Australian Democrats have further placed in jeopardy as far as this country is concerned by both their rhetoric and their actions. I shall briefly expand upon that. New Zealand has unilaterally redefined ANZUS because of its domestic anti-nuclear attitudes. It has said that it wants to remain in ANZUS, but it wants it to be a non-nuclear alliance. So it prohibits visits from United States nuclear-armed or nuclear-powered naval vessels. But the United States, as we know, is a nuclear power. It has an integrated nuclear capacity. It does not rule out a nuclear response to a conventional attack. Its defence against a potential nuclear attack is a nuclear deterrent. Therefore, what the New Zealand Government is doing is perpetrating a fraud because it seeks to remain in the alliance for domestic reasons, but it seeks to redefine that alliance in an unreal way, also for domestic purposes. It wishes to take the advantages of the alliance without incurring the costs. I thought until today that that was also the policy of the Australian Democrats, that they wanted to remain within the alliance in some way. But that appears to have passed. On what was said today, their policy is clearly one of total non-alliance. Until today, the Democrats had not come clean on that issue. I say in passing that I do not know whether it is any less a fraud in the case of those countries which argue that they are non-aligned, and which nevertheless behind closed doors seek the advantages offered by the Western democratic parties. I now include the Australian Democrats in my concern. Until today, the Australian Democrats, behind the vehement anti-American rhetoric that we have heard in the past and we heard again today, have sought the benefits of the American alliance. That stance appears to have passed. I for one, and I think the Australian people, would not want to be relying upon the words of a treaty document when the spirit upon which that treaty is based has been destroyed. I fear that that is the position into which the Australian Democrats have put Australia today. That brings me to the position of the Australian Labor Party, which is deeply split on the alliance; not as to whether we should be a party to it, but on what we are prepared to pay for our commitment. A strong section of the Party is opposed to joint surveillance bases, visits of nuclear ships and unarmed nuclear aircraft flying over Australia; in other words, opposed to any contribution Australia may make to maintain the effectiveness of the alliance. This rhetoric of the Left within the Labor Party led to the embarrassing backdown by the Government last year in relation to United States missile tests, when the Australian Government was not even prepared to allow its ally to refuel unarmed monitoring aircraft in this country. I would ask what that does for the spirit of the alliance. How much can we rely on the spirit of the ANZUS alliance if our ally finds the Government behaving in that way, simply because it has to answer to a particular faction of its Party? What did it do for the spirit of the alliance when a British naval ship, HMS Invincible, was unable to call at Sydney Harbour for repairs? It seems that the Government is looking for ways to limit visits of United States ships to Western Australia, presumably in answer to the demands of the Left faction of its Party. I wish to make my position clear and to answer what was said by Senator Sibraa. He said that we advocate a United States policy all the way in an unquestioned form. That is not the case; we do not advocate an all the way with the USA policy. Within an alliance we say that we are certainly entitled to offer constructive criticism. Senator Robert Ray —When was the last time? Senator HILL —I do it quite often and I will mention a few examples. Let us be aware of the balance of what we are putting in to the alliance to earn the benefit of the alliance. I suggest that we are putting in very little. Many of my colleagues and I have expressed concern about the power of the United States armaments industry and its influence on United States policy. Many of us have criticised the arms race and the gross overcapacity of nuclear weapons of both of the super-powers. I think that all of us are concerned to ensure that the strategic defence initiative does not lead to a further extension of the arms race in outer space, although we recognise the legitimacy of looking at ways to defend against missiles rather than simply relying on the deterrence of mutually assured destruction. We recognise the importance of advancing these arguments, but within a spirit of mutually looking to a safer world, rather than destabilising our major alliance upon which we must rely in the event of a threat which is beyond our capacity alone to repel. ANZUS is not an excuse for not facing up to our own reasonable defence responsibilities. The defence forces in this country have a low morale, are poorly paid and often are poorly housed. They are over-bureaucratised and frustrated. What concerns me more is that they have a feeling that their role is not recognised or appreciated by the Australian community. To some extent that is true, and the Government has done little to help. For example, the tax decision on the defence reserves, perhaps minor in itself, has brought them to believe that their role is simply not appreciated. Unhappy defence forces are not in this country's best interests. It is about time that this Government did something about that. In doing so, not only will it better contribute to Australia's defence in the case of what we might call lesser threats but also it will positively contribute to the alliance. There are many other ways in which Australia can contribute to world peace. I remind honourable senators, as I have done before, of the role we have played in peacekeeping forces in the past. It was a small but worthwhile role. In the Sinai we did it between two countries which had a unique treaty. What has this Government done? It has resolved to pull out Australia's contingent. In the settlement of regional conflicts there is so much that we can do, even in this region with the worrying concerns of the Papua New Guinea-Irian Jaya border dispute and the problems of New Caledonia. We could have done more in Indo-China if the current Minister for Foreign Affairs (Mr Hayden) had not totally misread the situation of our friends within the Association of South East Asian Nations. We can provide more aid and help to those countries within our region which are weak. The example was given earlier by one of my colleagues of the Russian fishing agreement with Kiribati. If Australia had taken more interest in supporting the smaller, weaker states in the Pacific, perhaps these vacuums would not have been created within which super-powers could take advantage. The Pacific abounds with such examples of where we can contribute. We must never forget the role we can play in the provision of our natural resources to those who are in need. The Government has assumed an illogical position with regard to Australian uranium. To lock up Australian resources is the worst thing we can do for world stability and security. What this Government has sought to do is to grandstand on the world stage rather than to contribute in ways in which we can meaningfully play a role. With regard to the United Nations Security Council, I have searched to see what we have contributed which has been worth while. The Australian Democrats appear to be beyond salvation, pushed further and further to the Left as they have sought to retain a little of their diminishing constituency. But it is the Government which has the important role; in its contribution to peace and security it has been strong on rhetoric and weak on performance. It is a critical area of government responsibility and, with its weak performance to date, the Government deserves to be condemned. Senator ROBERT RAY(Victoria)(4.38) —For the first time since I have been a member of this chamber, when Senator Durack spoke on this matter of urgency today I listened to him for over 20 minutes. I listened to that rather dreary dirge and wondered what was urgent about the matter before us today that had to be discussed, when we have discussed it twice already in the previous 12 months. I did not hear put forward one reason why this is an urgent matter today. I guess it was put forward to waste another two hours of the time of this chamber. I must have been very naive when I first came here. I expected this to be a legislative chamber. But we never seem to discuss legislation. Opposition senators seem to push their irrelevant barrows all over the place, discussing minutiae and trivia. We never get to discuss legislation. We have been here one day and a half and have spent about two hours on legislation. We get these matters of public importance raised. I guess this matter of urgency was put forward simply because someone on the Opposition side was too lazy to write another speech. Opposition members just went back and dug out one from six or eight months ago. As to the substance of the matter of urgency, I have no difficulty with it and nor has anyone on the Government side. We, as a Labor government, are committed to supporting the United States alliance in the context of ANZUS. We have done so from its very formation in 1951 right through to the current time and, if I am any judge, we probably will do so for many years into the future. It is not that we give ANZUS or the United States of America our uncritical support. At various times we have disagreements with our allies. We will not serve the United States interests well by simply being an obsequious or toadying ally, as many of those on the Opposition benches would seek to have us be. We play the best role with the United States by being a partner-a critical partner at times-which tries to push it in a particular direction which is in our own interest. I have no hesitation in joining in supporting an historical alliance that we have had with the United States during two wars, especially since the Second World War. If I have to make a choice between a world power system, I will choose the United States system every time, given its commitment to pluralism, democracy and human rights. I have absolutely no difficulty in making that choice. But I am disappointed at times with the Liberal Party in this country for its use of foreign affairs as a political end to try to whip up a bit of electoral support. It has done so for 30 years. Sir Robert Menzies was a master at using foreign affairs to stir up and scare the electorate, with his talk of red hordes or yellow hordes coming from the north. I remember the elections in 1961 and 1963 when all the maps appeared, showing the Chinese coming to invade Australia. It is amazing how quickly things change. The Chinese are now our valued friends. We are sending trade missions, and even military missions to each other's country. It seems that yesterday's enemy can be today's friend. But kicking the communist can, trying to prove that it is more loyal to the United States, that in some way the Labor Party is tainted and cannot really be trusted in regard to foreign affairs, has been a favourite Liberal tactic over the years. I will not respond here by saying that we are any more patriotic than those opposite or that we are any more pure in regard to foreign affairs than those opposite. I simply say that the use of foreign affairs issues just to promote the domestic self-interest of a political party is a poor attitude in politics. Maybe Senator Durack is trying to find the Liberal Party's Falkland Islands. Maybe the Liberal Party is trying to find some issue on which it can ride back politically. But I do not think Admiral Durack will be the one who ever does it. I am afraid that his speech today is hardly likely to set the electorate alight. There are, of course, in this chamber, in this Parliament, in this country, and even in my Party, critics of the US alliance. In many cases their criticism of the US alliance derives from their very genuinely held views on disarmament. But the Labor Party as a whole-and we are a collective party-does not support unilateral disarmament. Anyone who supports unilateral disarmament, in my view, does the service of peace enormous harm. We are in favour of bilateral disarmament, of the two super-powers sitting down and coming to agreement on reducing arms as quickly as possible. But I do not see any point in Australia telling the Americans that they cannot have bases in Australia. I do not see any value in telling the Americans that they cannot port their ships in Australia. It will not help world peace to weaken one of the super-powers while the other remains unimpeded. It will not help world peace if all of America's allies in Europe, Australia or elsewhere drop off, whilst the Soviet Union's allies remain staunch supporters of that country. Most of us would realise that world peace, or at least peace based on non-nuclear war, tragically has been assured by mutually assured destruction more than by anything else. The concept of mutually assured destruction depends on both sides basically having an equality of threat. To weaken one side is more likely to cause a global nuclear war than the maintenance of some form of balance. It is within that context that Australia has been vocal in its alliance with the United States in its relationship with the United States, to urge it to the negotiating table, to bring about discussions on bilateral disarmament. That is why we appointed an Ambassador for Disarmament. That is why we have promoted that issue so stongly. I admit that at times we do look like hypocrites. It looks as though what we are doing is, on the one hand, urging disarmament, yet allowing American military presence in Australia on the other. but I say that there is no dual standard, because one can serve world peace by doing both-by allowing the Americans to be involved, by having bases in Australia and home porting their ships in Australia, while remaining a party committed to disarmament. There is nothing inconsistent in that policy at all. The coming talks between Gorbachev and Reagan may see one of the first breakthroughs in the area of disarmament. I am sure everyone in this chamber would welcome that breakthrough. But there is another area that concerns me. It is not so much what is termed vertical proliferation but horizontal proliferation of nuclear weapons. In my view that still represents the greatest danger to world peace. I am disturbed at the various reports from countries that maybe going nuclear. From time to time one hears claims that countries as diverse as Israel, Iraq, South Africa, Pakistan, Argentina and Brazil are researching and developing nuclear weapons. If they do so I think that will present a major threat to world peace. I want to go back to one point about this urgency motion. The point was made today-adverted to by Senator Hill-specifically by Senator MacGibbon and others saying: `We know that the Prime Minister, the Foreign Minister and the Minister for Defence are in favour of ANZUS, but maybe the rest of the Labor Party is not'. We are not a party with one uniform view. We have never pretended to be. We always believe in a majority rule and a collectivist decision. But the accusation has been made against the Western Australian branch of the Australian Labor Party that it does not want any ships visiting Western Australia. What those people are complaining about, and I think rightly so, is the disproportionate number of visits that they are subjected to and other Australian ports are not. They find that at times it creates all sorts of strains in that city of Perth if nearly all the visits occur in that area. I do not think it is particularly fair to distort the position of the Western Australian branch of the Labor Party in that way. This urgency motion is not really an urgency motion. There is nothing particularly urgent about it. It is probably a fishing expedition carried out by Senator Durack. He decided to throw a bit of bait over the side of the boat and see what snapped at it. The only thing that has really snapped in this chamber today has been Senator Chipp. But again he is putting a very predictable point of view. He espoused-I think with great passion-his views on the American alliance. I as a constituent of his in 1966 listened to him espouse some very passionate views on the Vietnam war and his view of world peace then. He was equally passionate and logical. I do not know how to choose between the two. His views expressed today were 180 degrees diametrically opposed to his views 20 years ago. The one consistent thing was the passion and logic of the argument and the intellect he brought to bear on that subject matter. I have not changed my views in those 20 years. Maybe that is a condemnation of me. I have been in the middle of his two views and I have not particularly changed. However, I do assert that it is in Australia's interests to continue its alliance with America, not in a non-critical way. It is our job to argue that the United States and the Soviet Union should disarm in a bilateral sense and that those sorts of processes will not come about through wishful thinking. We will not get disarmament by basically thinking good thoughts or by being basically nice. Unfortunately, we will get disarmament by a long, protracted series of negotiation, of callous horse trading and by long and boring meetings. That is the unfortunate thing. Disarmament will not happen overnight and it will not happen by a miracle. It certainly will not happen by just saying that Australia should opt out. I think I heard Senator MacGibbon say one thing that I agreed with. We cannot opt out of a nuclear war any more. The fact that we do not have communications bases in Australia, if we pack them up and send them home, and the fact that we will not allow ships to visit would not matter. Once the nuclear war starts and the nuclear winter sets in, it will get us just the same, albeit three months later than anywhere else. We have to have a commitment to make sure that there is never a nuclear war. We cannot crawl under our desks and say `We will have nothing to do with arms or anything else' and it will all go away. Tragically that will never occur. In conclusion I say that whilst I support the content of the motion I certainly do not support the concept that this was an urgent or necessary debate today. Senator VALLENTINE(Western Australia)(4.50) —I begin by reminding honourable senators of something that was said over 100 years ago in the British Parliament by Lord Palmerston. He stated: There are no such things as eternal enemies nor eternal allies, only perpetual interests. I agree with what Senator Robert Ray, the previous speaker, just said in that regard. He said that it seems that yesterday's enemies can be today's friends. That is the basis from which we must start this discussion. I disagree with many other things that Senator Ray has said and I will work back along the line of speakers we have heard in this debate so far. To say that this is not an urgent matter begs the question. It is the most fundamental, crucial and vital matter which could be discussed in any parliament of any nation. To call it irrelevant or trivial is indeed offensive to the many people not only in Australia but also around the world who consider this matter one of vital importance. Nothing could be more important than a debate on nuclear disarmament and Australia's role in that vis-a-vis the alliance with the United States of America. I also need to remind Senator Ray that the theory of mutually assured destruction is way out of date. We are no longer in a situation which relies on deterrents. We are not in a situation in which both the Pentagon and the Kremlin are working under a system known as nuclear use and tactics strategies. In other words we have got from MAD to NUTS. So for honourable senators on either side of this chamber to talk about deterrents is really talking in terms that are well out of date. I wonder whether I misheard Senator Ray when he said that the Australian Labor Party is not opposed to the home porting of United States warships. Senator Robert Ray —You misheard. Senator VALLENTINE —I hope that that was a mistake because the terms of the South Pacific nuclear free zone treaty just put in place by the Labor Government which, incidentally, allows more nuclear activities than it bans, certainly do not give the green light to home porting nuclear ships. So if I misheard him or was mistaken about what he said, I am very pleased. It is not just the Australian Democrats, Senator Hill and the Left faction of the Labor Party who are worried about this issue; it is people right across the political spectrum not only in Australia but, as I have said, around the world. To keep on labelling people who are concerned about the ANZUS alliance as left wing or radical people is to trivialise the debate. Very conservative people are also concerned about this issue and I think that they demonstrated their concern very clearly when over half a million of them voted for nuclear disarmament over and above any other issue in the last Federal election. Senator Hill said that the base on which the ANZUS Treaty was formed has been eroded. I agree with that. That Treaty-it is a flimsy bit of paper which is more than a sham as Senator Chipp called it-is a millstone around our neck. It is certainly outmoded. The thinking in the 1980s needs to be very different from the thinking of the 1950s which was when that Treaty was formulated. It was designed to allay Australian fears about the Japanese; it was nothing to do with anything nuclear. The alliance that has been built up behind that Treaty is all about nuclear weaponry and it is directed against the Soviet Union. This was not the original intention. I would have to agree with Senator Hill that the basis for the formulation of that Treaty has long passed; it has been eroded. I was very surprised to hear Senator Sibraa say that, according to the Labor Party, Australia's sovereignty is protected by the ANZUS Treaty and the alliance. That is a most incredible statement. It is very difficult for me, as a senator and as an elected representative of the people of Australia, to get information about what this country is actually involved in. Secrecy has surrounded all things nuclear in this country since the signing of the Treaty in 1952. Everything that has flowed from that time has been conducted in secret. The Australian people were never consulted about the establishment of any of the bases on Australian soil. The Australian people are still finding it very difficult to get information, even through their elected representatives, about Australia's involvement in matters such as the Geosat testing which has just taken place, its possible link to MX missile testing and exactly what is going on. So far as this country's commitment to the United States is concerned it is very secret indeed and I think that is one of the main problems with the whole alliance at the moment. How Senator Sibraa can say that Australia's sovereignty is protected, I do not know. Australia does not have any independent decision making powers whatsoever if it sticks to this Treaty. Admittedly, the Labor Government is prepared to criticise some aspects of the Treaty but if we have a Liberal Government how much worse that situation would be because its policy is unconditional and one of total support for that alliance. I challenge something that Senator MacGibbon said about New Zealand's naive action in prohibiting the entry of nuclear armed and powered warships into its ports. He said that that action has affected Australia's security. I challenge that statement. I do not think Australia is one jot less or more secure because of the New Zealand nuclear warship ban. I believe that this Government should have supported New Zealand more that it did in that stand as opposed to criticising it more, as Senator MacGibbon suggested it should have. Senator MacGibbon also said that the United States, as an equal Treaty partner, would not ignore the reasonable expectations of its Treaty partners. I believe that, as a Treaty partner, it was a very reasonable expectation of New Zealand that it should be able to exercise its sovereign right to say: `We do not want nuclear weapons coming into our ports aboard United States ships'. The United States Government has kicked up such a fuss about that that it seems it does not adhere to the reasonable expectations of the Treaty partners. It either ignores them or makes a big fuss when any of the Treaty partners tries to exert its independence. It is an important matter of record that in 1971, when the McMahon Liberal Government was in office, the entry of nuclear ships to this country was prohibited. There was not a squeak, not a word, in any of the ANZUS communiques that came out in the years immediately following that ban. There was no opposition to that from the United States point of view. So we must ask the question: Why is there now so much opposition to the New Zealand stand? I believe that the opposition is purely political rather than strategic. The Americans are very worried by what they call the Kiwi disease, or the nuclear allergy. Well might they be worried, not only because of Australia's and New Zealand's stand but also because their allies in other places are criticising their nuclear armaments buildup-in Greece, in Spain, in the Netherlands. Senator Robert Ray —Not in Eastern Europe. Senator VALLENTINE —The point is that it is not confined only to the North Atlantic Treaty Organisation allies. I think the point I am about to make will address Senator Ray's interjection. The fact is that the Warsaw Pact allies are also criticising the Moscow buildup of armaments. The only reason that there has been such a lot of publicity leading up to the summit between Gorbachev and Reagan is that the leaders of the two super-powers are finally realising that the world's people are demanding to have a say in this issue. East and West, the world's people are saying to the super-powers: `This is enough of the nuclear insanity. We need to have our voices recorded as being against any further buildup of nuclear weapons'. So I believe that the climate of the world's people is actually forcing the leaders of the super-powers to discuss this issue seriously, and I wish them the very best in Geneva on 19 November. We need to look at the public perception of the ANZUS alliance in this country. Since the early 1950s the Australian people have generally believed that the ANZUS alliance is like security blanket, that Australia is very secure because of our alliance with the United States. I think Senator Chipp has adequately and eloquently pointed out that we are not secure, that we have no guarantees whatsoever that we would be saved by the Americans in the event of any regional conflict. Since the writing of this Treaty-this flimsy document-the alliance which has sprung up behind the Treaty has involved Australia in enormous risks. I find it extremely disappointing to hear people on the Labor side of this chamber saying that the benefits outweigh the risks. According to the Labor Party and members of the Liberal Party, the ANZUS Treaty affords us benefits such as military intelligence, joint exercises, which I think we could well do without, and the technological edge we have over competitors for armaments. I think that is too slight a benefit by comparison with the enormous risks to which we are subjected by becoming a nuclear target. We have enemies in this world now only because of our alliance with the United States. We would not be on anybody's target list at this very moment if we did not have United States bases on our soil, if we did not invite United States warships into our ports. According to the terms of the Treaty, we are not obliged to do any of those things. The Treaty does not tie us into having bases on our soil. It does not tie us into welcoming warships to our ports; neither does it tie us into helping with the Geosat testing or MX missile testing or the strategic defence initiative, which the Liberal Party would endorse wholeheartedly. The Labor Party likes to talk about self-reliance, but in reality the Labor party's policy is subservient to that of the United States. We do not have an independent foreign policy, although there is a great deal of talk about it. We need to develop an independent defence capability so that we can then move to a situation in which we can have an independent foreign policy. Australia needs to look beyond the blocs. We need to remove Australia from any alliances with the nuclear super-powers, because we would then be making a moral stand away from the insanity of the nuclear arms race. We need to look at an alternative vision for Australia which is independent and nuclear free. We can be nuclear free only if we are independent. The two go together very closely indeed. The world's people are demanding that we think beyond the blocs, that we think beyond the traditional paths of East and West, that we realise that we have but one fragile planet which we must learn to share, regardless of differences in political ideologies. I am not saying in this instance that we need to take on board any of the tenets of the Soviet life style or philosophy; we do not have to do that. But moving away from the American alliance, we will not then be stupid enough to move into an alliance with another super-power. What I am talking about is Australia standing clear, removing itself from any immoral nuclear alliances-because that is what they are. We need to look at alternative options for Australia in this respect. It is no good just being against something; we must be for something. Australia needs to be discussing seriously at the national political level a variety of concepts out of which we could find a model that was suited to Australia's unique geo-strategic position. We are in a very different position from that of any other country on this earth, because of our isolation and our long coastline, so we have many factors working in our favour concerning defence. One of the areas at which we should be looking very closely is that of neutrality. This is a concept which would follow the line of Sweden and which would remove us from any military alliances with any nation whatsoever. Senator Crichton-Browne —What about Cuba? It is not aligned. Senator VALLENTINE —We must also look at the possibility of non-alignment-not as that label is sometimes used by countries such as Cuba, which clearly are aligned. What I believe Australia should be looking for is a step away from alliances with any super-power. We should also look at the concept of defensive defence. That is different from neutrality in that it does not allow for any offensive weapons whatsoever to be in a country's arsenal. Switzerland is a very good example of that type of defence arrangement. Countries that were thinking of invading Switzerland would know that it would be a very expensive exercise and that they would have to expend a lot of resources to invade Switzerland successfully. Our geographical situation, of course, is different. But it reduces the threat levels on the world political stage if a country is known to be capable only of defending itself rather than mounting an attack against any other nation. We should-- The DEPUTY PRESIDENT —Order! The time under sessional order for consideration of the matter of urgency has expired. Motion (by Senator Durack) put: That so much of the Standing Orders be suspended as would prevent the question being put forthwith. Question put. The Senate divided. (The President-Senator the Hon. Douglas McClelland) Ayes . . . . . . . . . . . 38 Noes . . . . . . . . . . . 29 —— Majority . . . . . . . . . 9 —— Archer, B. R. Mason, C. V. J.Baume, Michael Messner, A. J.Baume, Peter Missen, A. J.Boswell, R. L. D. Parer, W. R.Brownhill, D. G. C. Puplick, C. J. G.Carrick, Sir John Rae, PeterChipp, D. L. Reid, M. E.Collard, S. J. Sanders, N. K.Crichton-Browne, N. A. Sheil, G.Durack, P. D. Short, J. R.Guilfoyle, Dame Margaret Siddons, J. R.Hamer, D. J. Teague, B. C.Hill, R. Townley, M.Jessop, D. S. Vallentine, J.Kilgariff, B. F. (Teller) Vanstone, A. E.Knowles, S. C. Vigor, D. B.Lewis, A. W. R. Walters, M. S.MacGibbon, D. J. Watson, J. O. W.Macklin, M. J. Withers, R. G. Aulich, T. Giles, P. J.Black, J. R. Jones, G. N.Bolkus, N. McClelland, DouglasButton, J. N. McIntosh, G. D.Childs, B. K. McKiernan, J. P.Coates, J. Maguire, G. R.Colston, M. A. Morris, J.Cook, P. F. S. Ray, RobertCooney, B. Robertson, E. A. (Teller)Devlin, R. Ryan, S. M.Elstob, R. C. Sibraa, K. W.Evans, Gareth Tate, M. C.Foreman, D. J. Walsh, P. A.Georges, G. Zakharov, A. O.Gietzelt, A. T. Bjelke-Petersen, F. I. Coleman, R. N.Chaney, F. M. Grimes, P. J.Haines, J. Richardson, G. F. Question so resolved in the negative there being an absolute majority. Senator Chipp-I give notice that, on the next day of sitting, I shall move: That this matter be recommitted for a vote. The PRESIDENT —I think the honourable senator must seek leave for that. Senator Chipp-I seek leave. Leave not granted. Debate resumed from 16 October, on motion by Senator Coates: That the Senate take note of the report. Senator COATES(Tasmania)(5.13) —At this stage I have very little to add to the comments I made when I first tabled this report a couple of weeks ago. I merely appeal to any interested honourable senator, statutory authority, or anybody else for that matter, who has any suggestions about the way in which we classify and present the listing of statutory authorities to contact the Committee with their suggestions. Question resolved in the affirmative. Motion (by Senator Walsh) agreed to: That consideration of Committee reports pursuant to sessional order be not further proceeded with this day. Senator TATE(Tasmania) —I present the fourteenth report of 1985 of the Senate Standing Committee for the Scrutiny of Bills concerning the Bounty (Agricultural Tractors and Equipment) Bill 1985, the Bounty (Metal Working Machines and Robots) Bill 1985, the Interstate Road Transport Bill 1985 and the Interstate Road Transport Charge Bill 1985. I also lay on the table `Scrutiny of Bills Alert Digest No. 13' dated 6 November 1985. Ordered that the report be printed. Senator GILES(Western Australia) —I table additional information received by Estimates Committee B and seek leave for it to be incorporated in the Hansard record of the Committee's proceedings. Leave granted. Debate resumed. Senator WATSON(Tasmania)(5.14) —Just prior to the suspension of the sitting for lunch I was highlighting some of the deficiencies of the Labor Government's so-called generalised taxation reform package and I was addressing the manner in which it has failed to address the inequities and inefficiencies of the present system. The Government's proposals have totally failed to address the need to decrease government expenditure, a measure which I believe should be an essential component of any attempt to reduce the taxation burden. Due to inflation wage and salary earners will still be forced into very much higher tax brackets, destroying incentive to work or to take a risk. The incentive to find ways around the new fringe benefits taxes will also be increased. A reduction in tax levels in 12 months time will do little to alleviate these problems. The Labor Government, if it is genuine about tax reform, should check out its policies to determine whether they are equitable, efficient and effective and also conducive to economic growth and development. Unfortunately very few could get past the score of four on a scale of one to 10. Even the proposed reduction in the personal income tax scales is hopelessly inequitable because low income earners will be worse off, relative to high income earners. Marginal tax rates for 1987-88 incomes of below $19,500 will be reduced by a mere one per cent, while the reduction on higher incomes is between 6 and 11 percentage points. At least 60 per cent of taxpayers will be earning below $19,500 in 1987-88, so the changes in the tax scales will simply redistribute income from the less wealthy to the more wealthy. Furthermore, the impact of the bracket creep will ensure that 1.6 million taxpayers will have moved out of the 29 per cent marginal tax bracket into the 40 per cent tax bracket either by the time the new rates commence in July 1987 or at least within 18 months after their introduction. As a result of the tax reform measures, most taxpayers will be worse off in real terms after the introduction of the new tax scales. This, of course, assumes that there will be wage increases in the future and that inflation will continue to plague us. As has already been pointed out, other new tax measures will almost certainly result in increases in labour costs and inflation, so the average Australian on the average wage or below will, without question, be worse off in real terms. So much for tax reform. How can we be better off-after all, that is what reform should accomplish-with taxation measures which, firstly, ensure that the average wage and salary earner is worse off; secondly initiate a capital gains tax which is unable to draw a distinction between productive investment and speculative investment and which will destroy the profitability of many small businesses; and thirdly, depart from the basic principles of taxation by requiring employers, rather than employees, to pay tax on fringe benefits and eliminate genuine business expenses from tax deduction? The measures are directly responsible for the loss of thousands of jobs in the hospitality and car manufacturing industries, which will surely result in a downturn in the economy. This tax reform system is anti-business and will result in decreased profitability, increased labour costs, increased costs to the consumer, a loss of business confidence and a loss of incentive and entrepeneurial risk taking. It is a system which makes no provision for one income families with dependent children; a system which causes confusion, dismay, disenchantment and uncertainty in all sections of the community, mainly due to the fact the legislation necessary has not yet been drafted and will not be available for public scrutiny for quite some time yet and a system which is inequitable and discriminatory. The proposed treatment of farm losses effectively discriminates against farm business activities by introducing a special set of conditions which do not apply to most other activities. It is inconsistent in a sense that it does the very opposite in respect of certain mining losses. Finally, it is a system which effectively perpetuates the problems in the existing tax system; that is, the heavy reliance on personal taxation as a source of revenue-the bracket creep. The Government has obviously not sufficiently taken into account the negative economic effect of some of its proposed new taxes. It has obviously bowed to union pressure and ended up with a hotchpotch of disincentives for progress. As the legislation has yet to be introduced, perhaps Mr Keating will use the next few months wisely to do his homework and come back with an amended version which will help to keep Australia going. I believe the tax package will collapse like a heap of cards when the whole community realises that it is a complete fiasco and a waste of time. Senator COOK(Western Australia)(5.20) —We are debating the statement by the Treasurer (Mr Keating) on taxation. The first comment which should be made in this debate is that reform of the tax system is widely regarded as the hardest political achievement of any government. That is no doubt that the previous administration displayed over the years considerable cowardice in attacking the need for comprehensive tax reform in this country. As a result of its failure to move in this area we have seen the Australian tax system become progressively unjust and unfair as the burden has been increasingly shouldered by wage and salary earners, all of whom by virtue of pay as you earn deductions have paid their full share of taxation. Increasingly, we have seen that those who are in positions of power and wealth are able to exercise that power and wealth to avoid the payment of taxation. So great was the loss to revenue that, increasingly, the burden that was shouldered by wage and salary earners was topped up, in order for governments to meet their income needs from taxation, by further loads being put on that sector. The scales of taxation, the marginal rates and average rates of taxation, designed for the really wealthy in this country 10, 15 or 20 years ago are now being paid by ordinary wage and salary earners. That is in itself is a major injustice. The other outstanding major injustice has been that because the rich and wealthy have been able to avoid taxation the avoidance and evasion industry has flourished in this country and massive losses to revenue have been occasioned by it. The previous administration made no effort at all to bring this industry to heel. It was only in the face of a major public scandal that desultory attempts to focus on this were made at all and then, in the case of the Fraser Government, in outright opposition to some of the divisions of the Liberal Party of Australia, notably the division of the Liberal Party from my own State, Western Australia, whose finance committee attained great national notoriety by harbouring within its ranks a number of people named as large scale tax avoiders. The first point that should be made is that there is a great deal of respect being accorded this Government because of its courage in facing up honestly, fairly and comprehensively to the need for tax reform in this country. There is a great deal of recognition by independant commentators and the media, grudging recognition by some politicians from the Opposition and recognition and respect from widespread section of the community that we have had the courage to confront this issue. The reason we have had to confront it is that previous administrations have not had that courage or have not been prepared for particular reasons, to do so. The course of tax reform in Australia has not run smoothly. The Government, in deciding to deliver on its major electoral commitment laid down by the Prime Minister (Mr Hawke) in his policy speech at the Sydney Opera House last November, committed itself to nine major points of reform. In pursuing, after the election, that commitment we brought down earlier this year a comprehensive statement of various tax reform options, submitted them to public dialogue and debate and conducted a major exercise in consultation with the community at the National Taxation Summit early in July. As a result the package of tax reform measures that has been announced has come forward. It has been said by some that to take that course displayed weak leadership. I assert that that is not an entirely false and indeed, in the case of this Government, defamatory statement; it is an illusion. To consult with the community, for a government to seek to reflect adequately the views of all the interests of the community, to go through a period of debate in which there is confusion by virtue of some of the blinds and arguments that are put forward and to endure that period of debate in the interests of full and frank consultation is a courageous step by government. It takes strong leadership to listen quietly while the community speaks rather than to adopt a dictatorial attitude of proclaiming from on high what policy should be. I think that the Prime Minister and the Treasurer both have to be recognised not only as effective reformers on the tax front but also as people with personal courage. Their courage and that of the Government that supports them is recognised. They listened to the voice of the community, absorbed it, and produced a statement which proposes a number of Bills all containing measures of reform that are necessary. Many aspects of that statement have been widely and, in all honesty, grossly misrepresented. The changes that we have announced will complement the whole range of economic policies that this Government has put in place following its election in 1983. The set of tax reform measures compliments those economic changes in order that we will be able to sustain ongoing economic expansion and growth so that we can continue to maintain lower levels of inflation and unemployment, higher job prospects and a continuing scenario wherein the Australian economy will expand to this year's targeted growth rate of 5 per cent. So through economic growth we can achieve the employment climate that Australia and particularly young Australians require. As I have said, some of the reforms that we have introduced have been misrepresented. In any package of major reform which involves overhauling a whole creaking, obsolete system, there will of course be winners and losers. I believe that there is no rebuttal to the assertion that the so-called losers in this package are those who ought to have paid tax in the past. From that point of view, they are not losers but rather people who, at long last, will be brought into the tax net and will be made to honour their obligations to this community. It is possible to misrepresent a package by selectively choosing aspects of that package and then arguing against those aspects to make it appear that the whole package was not fair. We saw an example of such arguments only yesterday in this chamber when, in a debate on a matter of urgency, it was asserted that the capital gains tax was somehow unfair to the community of Australia. If one were to listen to the arguments of the Opposition and its lurid allegations regarding the Government's proposal on capital gains tax, one could contend that what the Government is proposing is unfortunate. I could not argue in any sense, nor could anyone who looks fairly at what the Government has proposed, that the capital gains tax that we are projecting is other than a necessary tax, an overdue tax, in terms of international levels of capital gains taxes a soft tax and, in the group of comparable economies with which we align ourselves, brings Australia into line with tax measures in those parts of the world. In any case, it is a single component of an overall package and it balances that package to give it the fundamental principles upon which this Government has launched tax reform. I refer to principles of efficiency in the tax system, principles of equity and fairness to all taxpayers and the principle that in any reform measures it should be fundamental to stamp out tax avoidance and evasion. At this point it might be appropriate to stop. I seek leave to continue my remarks later. Leave granted; debate adjourned. Senate adjourned at 5.30 p.m. The following papers were tabled: Australian National University Act-Statute No. 184-Vice-Chancellorship Amendment No. 6. Export Control Act-Export Control (Orders) Regulations-Orders 1985- No. 9-Dairy Produce (Amendment). No. 10-Export Meat (Amendment). No. 11-Game, Poultry and Rabbit Meat (Amendment). Fisheries Act-Notice No. 153-Prohibition relating to the taking of scallops in Bass Strait, dated 21 October 1985. The following answers to questions were circulated: (Question No. 568) Senator Puplick asked the Minister representing the Minister for Arts, Heritage and Environment, upon notice, on 8 October 1985: What areas in New South Wales (NSW) did the NSW Government advise the Minister for Arts, Heritage and Environment warrant investigation as to whether or not they should be nominated to the World Heritage List following the meeting of the Council of Nature Conservation Ministers in July 1984. Senator Ryan —The Minister for Arts, Heritage and Environment has provided the following answer to the honourable senator's question: The New South Wales Minister for Planning and Environment has advised that the following areas may warrant investigation as to whether they are of World Heritage status: The Blue Mountains/Kanangra/Wollemi National Park Complex. The Alpine areas of the Kosciusko National Park particularly if linked with the Alpine areas in Victoria. The First Government House Site in Bridge Street, Sydney. Senator Button —Senator Brownhill asked me, without notice, on 14 October 1985 (Hansard, page 1135) for information on changes in the Bicentennial unit of the Department of the Prime Minister and Cabinet. I indicated in my reply that the only major change that had taken place since December 1984 was the recently announced expansion of the Branch to a Division, but that I would have this information checked. The Prime Minister has confirmed the information I have given. Changes between December 1984 and October 1985 have been of a minor nature. Five officers were transferred to the Department of the Prime Minister and Cabinet. The number of officers was gradually built up to nine at the end of September 1985. This included a Senior Executive Service officer in January 1985 and an additional Class 11 officer in September 1985. Senator Walsh —Senator Siddons asked me a question, without notice, on 19 September 1985 (Hansard, page 749) concerning the tax treatment of employee share acquisition schemes and how they relate to present taxation law. I responded that I would refer the matter to the Treasurer and he has provided the following response: The Government is well aware of the argument that productivity and industrial harmony would be enhanced by employee share acquisition schemes that encouraged the closer involvement of workers in the fortunes of the companies employing them. For some years, companies have claimed that current taxation arrangements, namely the operation of section 26AAC of the Income Tax Assessment Act, discriminate against and penalise employee share acquisition schemes. The former Government proposed exempting from income tax certain benefits to employees under approved employee share acquisition schemes but did not introduce legislation to give effect to its proposal. This Government referred to proposal for detailed consideration by the Employee Participation Committee of the National Labour Consultative Council. In May 1984, the Government announced that it had decided not to proceed with the former Government's scheme. This decision was based on the ground that the Government did not wish to promote inequities in the tax system through a favoured tax treatment of fringe benefits. It was considered that the existing tax arrangements correctly regard the benefits of such schemes as being as much a part of the total remuneration of employees as wage and salary income. The retention of section 26AAC of the Income Tax Assessment Act is of course, complementary to the proposals in my Statement to Parliament, on 19 September 1985, to tax other forms of non-cash fringe benefits.'