Friday, 17 October 1986 The PRESIDENT (Senator the Hon. Douglas McClelland) took the chair at 9 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 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- submarines 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 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 Senator Zakharov (from 90 citizens). To the Honourable the President and members of the Senate of the Australian Parliament assembled. The petition of the undersigned residents of Australia respectfully showeth: By cutting ESL funding and eliminating community languages and multicultural education funding you have attacked tens of thousands of Australian children. You have condemned these children with limited English to gross educational inequality and very dim prospects for their future. On behalf of these children we call on you to remove this new discrimination which your budget has guaranteed by immediately restoring ESL and multicultural education funding. by Senator Ryan (from 119 citizens). To the Honourable the President and the members of the Senate assembled. The humble petition of the undersigned citizens of Australia showeth that whereas: 1. The present Australian national flag is not distinctively and uniquely Australian and is confused with other national flags. 2. The people of Australia have never had an opportunity to express their views on an appropriate Australian national flag in a referendum. 3. The present Australian national flag does not properly represent Australia as a sovereign, independent nation. 4. The present Australian national flag falsely proclaims Australia as a colony, homeland, protectorate, dominion or government department of Great Britain. 5. The first condition in the flag competition of 1901 required that the design should show Australia's loyalty to the British Empire. The British Empire no longer exists. 6. A public opinion poll held in 1984 using the Gallup Method revealed that 52% of Australians surveyed wanted a competition for a new design for the Australian flag. 7. There is no inherent link between Australia proclaiming a unique and distinctive flag and the political issue of Australia moving to a republican form of government. 8. The adoption of a truly Australian national flag would serve as a focal point for Australia's bicentennial celebrations in 1988. Your petitioners therefore pray that your honourable House will: (a) Appoint a Committee of the Parliament with representatives from both Houses and all parties to invite and consider proposals for the design of a new Australian national flag, and (b) Require that Committee to make recommendations on the form of a minimum cost referendum at the time of the next general elections, in which the electors will be given the opportunity to vote for a flag from a selection of at least three designs which will include the present Australian national flag and the winner of the Ausflag-Bulletin-2MMM FM competition of March 1985. And your petitioners as in duty bound will ever pray. by Senator Georges (from two citizens). To the Honourable the President and members of the Senate in Parliament assembled. The humble petition of the undersigned citizens of Australia showeth: 1. That over 67,000 men, women and students enjoy the pursuit of their sport and recreation every year at the Anzac Rifle Range at Malabar and have done so since 1967. 2. The people of Sydney through their membership of 41 clubs headquartered at the Anzac Rifle Range together with a number of other community, school and commercial groups, the police and armed forces, will lose this community facility if the Federal Government proceeds to sell the Range to private developers. 3. The Australian Bicentenary Fullbore Rifle Championships are to be conducted at the Anzac Rifle Range in April 1988 as part of the celebration of Australia's Bicentenary. Your petitioners most humbly pray that the Senate in Parliament assembled should ask the Federal Government to retain the Anzac Rifle Range for the continued use and enjoyment of the people of Australia. And your petitioners as in duty bound will ever pray. by Senator Childs (from 27 citizens). To the honourable the President and members of the Senate of the Parliament of Australia assembled. The petition of the undersigned citizens respectfully showeth that your petitioners are gravely concerned at proposed cuts to the functions of the Human Rights Commission. In particular the undersigned believe that the Human Rights Commission or any body that may replace it in December must be allocated adequate resources for complaint handling and community education in the areas of human rights and equal opportunity. The functions at present carried out by the Human Rights Commission and the additional responsibilities relating to ILO Convention III require increased resources if the rights of Australian citizens are to be safeguarded effectively, particularly in States and Territories which at present lack anti-discrimination legislation. And your petitioners as in duty bound will ever pray. by Senators Giles (from 48 citizens) and Zakharov (from 26 citizens). To the Honourable the President and members of the Senate in the Parliament assembled. The petition of the undersigned citizens of Queensland respectfully showeth. That the `Lifestyle Questionnaire' currently being circulated by the Commonwealth Department of Veterans' Affairs contains sections which are intrusive and requests information which is neither relevant nor pertinent to a full and equitable assessment of the quality of a Veteran's lifestyle. Your petitioners humbly pray that the Senate: A. Request the Government to withdraw this questionnaire from circulation to enable the Department of Veterans' Affairs to delete the offensive sections, and B. Request the Government to cease those administrative practices which cause unnecessary worry and intrusion into the lives of Veterans who have fulfilled their duty to this nation and its people. And your petitioners as in duty bound will ever pray. by Senator MacGibbon (from 54 citizens). Petitions received. Senator COLLARD(Queensland-Leader of the National Party of Australia) —I give notice that, on the next day of sitting, I shall move: That the Kakadu National Park Plan of Management, prepared under the National Parks and Wildlife Conservation Act 1975, and laid before the Senate on 18 September 1986, be disallowed. Senator COONEY(Victoria) —Pursuant to my notice of intention, given yesterday, I now withdraw Business of the Senate, notices of motion Nos 2, 3, 5, and 11 standing in my name for disallowance of certain delegated legislation about which I made a statement yesterday. Senator MESSNER(South Australia) —I give notice that, on the next day of sitting, I shall move: That the following matters be referred to the Standing Committee on Finance and Government Operations- (a) the particular procedures of the Commissioner of Taxation and the Administrative Appeals Tribunal, in (i) raising and amending income tax assessments (ii) imposing of penalties and interest on such assessments (iii) dealing with objections and appeals against them, and (b) the Committee recommend changes to streamline and simplify the existing system and to safeguard the rights of taxpayers. Motion (by Senator Messner)-by leave-agreed to: That General Business Order of the Day No. 278 be discharged from the Notice Paper. Motion (by Senator Puplick) agreed to: That the Senate- (a) congratulates Mr Elie Wiesel, a survivor and historian of the holocaust, on the award to him of the 1986 Nobel Prize for Peace; and (b) commends the Norwegian Nobel Committee on its choice and notes with admiration the words of its citation that Mr Wiesel: `is a messenger to mankind, his message is one of peace, atonement and human dignity', and that his example shows that: `the forces fighting evil in the world can be victorious.'. Motion (by Senator Gietzelt for Senator Grimes) agreed to: That, unless otherwise ordered, the hours of meeting of the Senate, for the remainder of the Budget sittings, be varied as follows- (a) during the first sitting week- Tuesday, 2 p.m.-6.30 p.m. 8 p.m.-10.30 p.m. Wednesday, 10 a.m.-12.45 p.m. 2 p.m.-7.30 p.m. Thursday, 10 a.m.-6.30 p.m. 8 p.m.-10.30 p.m. Friday, 9 a.m.-12.45 p.m. 2 p.m.-3.45 p.m.; and (b) during the second sitting week- Monday, 2 p.m.-6.30 p.m. 8 p.m.-10.30 p.m. Tuesday, 2 p.m.-6.30 p.m. 8 p.m.-10.30 p.m. Wednesday, 10 a.m.-12.45 p.m. 2 p.m.-7.30 p.m. Thursday, 10 a.m.-6.30 p.m. Senator RICHARDSON(New South Wales) —I present the report from Estimates Committee A on the particulars of proposed expenditure for the year 1986-87 and expenditure under the Advance to the Minister for Finance for the year ended 30 June 1986, together with the Hansard record of the Committee's proceedings. Ordered that the report be printed. Senator ROBERTSON(Northern Territory) —On behalf of Senator Giles, I present the report from Estimates Committee B on the particulars of proposed expenditure for the year 1986-87 and expenditure under the Advance to the Minister for Finance for the year ended 30 June 1986, together with the Hansard record of the Committee's proceedings. Ordered that the report be printed. Senator CHILDS(New South Wales) —I present the report from Estimates Committee C on the particulars of proposed expenditure for the year 1986-87 and expenditure under the Advance to the Minister for Finance for the year ended 30 June 1986, together with the Hansard record of the Committee's proceedings. Ordered that the report be printed. Senator REYNOLDS(Queensland) —I present the report from Estimates Committee D on the particulars of proposed expenditure for the year 1986-87 and expenditure under the Advance to the Minister for Finance for the year ended 30 June 1986, together with the Hansard record of the Committee's proceedings. Ordered that the report be printed. Senator McINTOSH(Western Australia) —I present the report from Estimates Committee E on the particulars of proposed expenditure for the year 1986-87 and expenditure under the Advance to the Minister for Finance for the year ended 30 June 1986, together with the Hansard record of the Committee's proceedings. Ordered that the report be printed. Senator ZAKHAROV(Victoria) —I present the report from Estimates Committee F on the particulars of proposed expenditure for the year 1986-87 and expenditure under the Advance to the Minister for Finance for the year ended 30 June 1986, together with the Hansard record of the Committee's proceedings. Ordered that the report be printed. Debate resumed from 16 October, on motion by Senator Grimes: That the Bills be now read a second time. upon which Senator Messner had moved by way of amendment: At end of motion, add-In respect of the Income Tax Rates Bill 1986: ``, but the Senate is of the opinion that- (a) the Government's taxation policy, in particular its fringe benefits and capital gains taxes, is causing damage and confusion to business and farmers; (b) the Government's failure to deliver tax cuts on 1 September 1986 as promised in 1985 has caused additional hardship to families; and (c) this Government is the highest taxing Government in history, with taxed receipts estimated to reach 25.5 per cent of GDP.''- And in respect of the Medicare Levy Bill 1986: ``, but the Senate- (a) condemns the Prime Minister for breaking his promise that for the term of Labor's next Government, the Medicare levy would not be increased; (b) notes with concern that the Government continues to perpetuate the myth that the levy pays for Medicare health services when in fact it only pays approximately 40 per cent of the cost of Medicare with the balance being funded out of general revenue; and (c) condemns the Government for its total failure to take action to contain the massive blow-out in Medicare health costs''. Senator MAGUIRE(South Australia)(9.08) —The fringe benefits tax, the capital gains tax and the disallowance of entertainment expenses are keys to the financing of the Government's income tax reductions on 1 December. The Government will collect $575m from the fringe benefits tax in a full financial year, over $300m from the disallowance of entertainment expenses and further revenues from the capital gains tax. Those revenues are vital components in the financing of the substantial personal income tax reductions beginning on 1 December this year. Since November 1984 this Government has cut personal income tax substantially. For example, a person with a taxable income of $400 weekly will have received tax reductions of $12.70 weekly after the December tax cuts and a person with a taxable income of $300 weekly will have received personal income tax reductions of $11.35 weekly from 1 December. As a result of the Government's taxation changes no Australian will pay more than half of his or her extra income in taxation. The top marginal tax rate of 49c in the dollar will ensure that no Australian will pay more than half his or her extra income in the form of income tax. This is clear proof of the Hawke Government's commitment to lower taxation-two rounds of personal income tax reductions in two years. I would like to consider the record of the former Treasurer, the current Leader of the Opposition (Mr Howard), in taxation. Mr Howard was recently quoted in the Adelaide News as saying: I think the high marginal rates of tax are increasingly out of line with the need for more incentive in our tax system. Yet after five years as Treasurer, from 1978 to 1982, Mr Howard left a top marginal rate of income tax of 60c in the dollar. That was his record. Under Labor, from 1 July 1987, after the final instalment of the income tax reductions, the top marginal rate will be not 60c or 50c in the dollar, but 49c in the dollar. Yet Mr Howard has the gall to claim that the marginal tax rates under this Government are too high. Mr Howard was never good at making figures stick, but even this simple piece of arithmetic seems to have escaped him. Under the Fraser-Howard coalition Government, the top marginal tax rate was 60c in the dollar. Under the Hawke Labor Government, the top marginal tax rate will be 49c in the dollar. At the bottom of the income tax scale, the lowest income bracket, the best Mr Howard could achieve as Treasurer was a marginal tax rate of 30c in the dollar. That was his record. As a result of Labor's tax package, the bottom marginal tax rate will not be 30c or 25c in the dollar. It will be 24c in the dollar-6c below the lowest marginal tax rate that Mr Howard could deliver in five years as Treasurer. One can draw only one conclusion from these figures, which is that the Liberal Party is the high tax party of Australia. The Liberal Party talks about low taxes but could never deliver the goods when in office. What are the coalition's tax policies? We asked Senator Messner last night. He said that they would be forthcoming, but he was not specific about when we would see them. We do not know what they are. Mr Howard refuses to give any details. Trying to obtain firm policy commitments from the Opposition is like trying to get blood out of a stone. The Opposition ducks and weaves when any questions are asked about the specific details of its taxation policies. All we hear from Mr Howard on taxation is a lot of vague rhetoric. But rhetoric is no substitute for hard policies. The Opposition is attempting to con the Australian people in the matter of taxation. Mr Howard's only concession to his honest John title is his consistent support for indirect taxes. When Mr Howard was Treasurer, he showed a liking for increasing indirect taxes very sharply. For example, in the 1981 Budget, Mr Howard, as Treasurer, increased sales tax on all products by 2 1/2 percentage points. He introduced sales tax on a range of goods for the first time. In one financial year, Mr Howard increased total Commonwealth revenue from sales taxes by an incredible 35 per cent. There was a 35 per cent growth in indirect tax revenue in one year. But he was not satisfied with that. He repeated it in his 1982 Budget. In that Budget he again increased all sales tax rates by 2 1/2 percentage points. In that Budget, the 1982 Budget, he further increased sales tax revenue, making an extra increase in total collections by the Commonwealth of 27 per cent. That was Mr Howard's record-support for indirect taxation, with a 66 per cent compound increase in sales tax revenue in just two financial years. Mr Howard was a high tax Treasurer. That is the record. He could not lower personal income tax rates, but he had little trouble in increasing sales tax rates by a massive 5 percentage points across the board in two years. He effectively trebled the pre-existing 2 1/2 per cent rate to 7 1/2 per cent in two Budgets. Mr Howard and his colleagues remain committed to the idea of extending and increasing indirect taxes, which would have horrifying inflationary consequences. The Hawke Government's tax reform package has restored progressivity to the tax system. Once again the tax system has been based on the principle of an individual's capacity to pay. The Hawke Government will redistribute the tax burden from middle and low income earners. This is being done by closing the tax loopholes and by clamping down on the tax avoiders and evaders through such devices as the fringe benefits tax, the capital gains tax and the disallowance of entertainment expenses. In those ways this Government is closing loopholes and is cracking down on avoidance and evasion in the community, thereby creating a fairer and more equitable taxation system in Australia. The revenue from the fringe benefits tax and the capital gains tax, and from the disallowance of entertainment expenses, will finance the substantial personal income tax reductions to be given on 1 December. Those tax cuts will be in the form of an increase in the tax free threshold and very substantial reductions in marginal tax rates. Those marginal tax rates that are being reduced have nothing to do with inflationary taxation. It is an absolute nonsense for Senator Messner to sit there and parrot off about inflation and try to deny the fact that this Government is cutting the top marginal tax rate from 60c in the dollar to 49c in the dollar. The middle tax rate is going down from 46c in the dollar to 40c in the dollar. That has nothing to do with inflation. They are very real and meaningful cuts in marginal tax rates and in combination with the increase in the tax free threshold to $5,100, which is something that the Liberal Party, while in office, could never achieve, this Government is going to deliver very substantial reductions in personal income tax from 1 December. As I indicated earlier, under this Government, those reductions over a two-year period will amount to some $12.70 per week for a person on $400 a week taxable income. They are very substantial reductions in personal income tax which illustrate that this Government can deliver the goods in reducing taxation for ordinary Australians and making those in the privileged parts of the community pay their fair share of the Australian taxation burden. Mr Howard, as Treasurer, allowed the tax system to become increasingly regressive. Under Mr Howard and the Liberals, the Australian tax system fell into disrespect. That is the bottom line of it all. Under Mr Howard, the tax system rewarded a petty criminal obsession with tax fraud and evasion. They are the facts. They are the records of the late 1970s in Australia. Under Mr Howard more of the Australian tax burden was shuffled on to middle and low income earners. The proportion of tax receipts from pay as you earn taxpayers rose, while receipts fell from other income earners. Let us look at the Opposition's rhetoric. Despite all the Opposition's loud talk about cutting taxes, in five Budgets Mr Howard was not able to make substantial reductions to personal income tax or reduce the overall taxation burden. In fact, under Mr Howard as Treasurer-the figures show this very clearly in the Budget Papers-the proportion of gross domestic product going in taxation rose significantly. Senator Messner —But you've got the highest proportion ever. Senator MAGUIRE —Senator Messner should look at Mr Howard's record. The trend started under Mr Howard and the proportion of gross domestic product going in taxation at the end of his period as Treasurer was almost 2 percentage points above the share at the beginning of his period as Treasurer. Senator Messner should read the figures in the Budget Papers. Despite that record and despite the ratio of taxation to gross domestic product rising over the five years of Mr Howard's stewardship of the Australian Treasury, the Opposition continues to parrot the line that it is a low tax party. That is the myth it is trying to perpetrate in the community. The Opposition has no tax credibility. It could not reduce taxation when it was in office. Its present tax commitments combine irresponsible pork barrelling with a string of tired cliches. That is in stark contrast with this Government's real reforms of the Australian taxation system. Those reforms are very real and will contribute to a more equitable Australian society. They will boost economic efficiency and they will underpin the restructuring of the Australian economy. The reforms deserve support for those very important reasons. Senator SIDDONS(Victoria)(9.20) —We are debating cognately the Income Tax Rates Bill 1986, the Income Tax Bill 1986, the Taxation Laws (Miscellaneous Provisions) Bill 1986 and the Medicare Levy Bill 1986. I will confine my remarks to the three tax Bills and my colleague Senator Powell will comment later on the Medicare Levy Bill. In the three tax Bills we have at last the much publicised Government tax cuts which are part of the whole tax reform package. They are supposedly the icing on the cake for taxpayers after the imposition of the fringe benefits tax and tax increases in other areas, such as the capital gains tax. The tax cuts supposedly demonstrate the Government's commitment to reducing the tax burden on ordinary Australians. Let us remember the rationale for the fringe benefits and capital gains taxes. It was to spread the tax burden more equitably so that ordinary pay as you earn taxpayers would have some of the burden of high levels of income tax lifted from their shoulders. Let us see first what is the taxation burden on the shoulders of average Australians. There is no illusion about it; there is an enormous income tax burden on their shoulders. The PAYE taxpayer has really been clobbered over the last 15 years as the figures eloquently demonstrate. In 1970-71 PAYE tax collections made up only 33.7 per cent of total Commonwealth tax collections. By 1986 that 33.7 per cent had risen to 45.5 per cent-over 16 years. So there is an enormous burden on the backs of average Australians to raise the big slice of the revenue the Government needs to govern this country. The ordinary person-the worker, the self-employed person, the small business person-is being progressively slugged by an unfair tax system. Reform was essential. There is no doubt about that. Let us look at what has happened to tax rates at about the level of average weekly earnings. In 1955-56 average taxpayers faced marginal and average tax rates of 19 per cent and 10 per cent respectively. Today the corresponding figures are 46 per cent and 25 per cent. The marginal rate on the average income level is 46 per cent and the average level of average weekly earnings paid in tax is 25 per cent. One-quarter of the income goes in tax and the marginal rate is a massive 46 per cent. That marginal rate was designed to catch the millionaire 20 or so years ago. I turn now to Federal tax raisings. There has been a lot of debate about whether this Government is in fact the highest tax raising government in history. The facts are these: Federal tax raisings have increased from 24.6 per cent of gross domestic product under Fraser to 25.5 per cent of GDP at present, in spite of the trilogy and in spite of tax cuts. So I say to Senator Messner that the figures bear out the claim that the present Government is the highest taxing government in Australia's history. Senator Robertson —It depends on what you assess when you do that. Senator SIDDONS —I must qualify that statement later in my remarks and I will do so. The Australian Democrats know, as every thinking Australian knows, that we cannot have real tax reform in this country until we have tax indexation. It is absolutely essential that we remove the tax by stealth known in the jargon as bracket creep. If we are to restore incentive to average Australians, it is absolutely essential that income tax rates be indexed every year to take account of inflation. If we do not do that, tax reform becomes meaningless. I will demonstrate what has happened to the tax cuts as a result of inflation since the Government first announced that we were to get them. Despite the Government's tax cuts, the PAYE taxpayer will contribute the same proportion of total tax in 1986-87 as he did in 1985-86. This legislation will ensure that there are tax cuts, but because of inflation, there will be no reduction in the amount of money that the average Australian will pay. There will be no real tax cuts, despite the claims of a $1.5 billion tax a cut in 1986-87 and a $4.5 billion tax cut in 1987-88. The Australian Democrats have worked out an alternative, fairer system of income tax. This would involve tax indexation and a progressive rate of increase in the marginal rates of taxation from the threshold up to a maximum rate of 49 per cent. It is possible to eliminate these larger jumps in the marginal rate of taxation. If that were done, we could have a progressive rate of taxation, up to 49 per cent, which was streamlined and did not involve these enormous increases in tax as one receives wage or salary increases. Senator Messner —Is that revenue neutral? Senator SIDDONS —It is not quite revenue neutral, but it has been costed in our alternative Budget. I do not have the figure with me. It is certainly well within the restrictions of a responsible Budget, and one that keeps the deficit within bounds. At the end of my remarks I will move an amendment to the motion for the second reading which indicates that the Government should be condemned for not allowing indexation of personal income tax rates, which has allowed inflationary factors virtually to neutralise the Government's tax cuts. I hope the Opposition will support us in that regard. The amendment also condemns the Government for the very minor reductions in the marginal rate of tax at the level of the average income earner. That is the critical issue in tax reform in this country. Until those two points are addressed, we will not have real tax reform, as we should have, if we are to restore incentive to effort in Australia. I will be very interested to hear what the Opposition has to say about those amendments of the Democrats. I hope it will support us, and that it will foreshadow that, if it does form a government in the future, it will be responsible in regard to personal income tax reform in this country. The Government's tax reform is far from satisfactory. But it is clearly preferable to the alternative offered by the Opposition, which is no tax reform at all. At least, that is the most we can make of it so far. Senator Kilgariff —Just have patience. Senator SIDDONS —I will talk about patience now. I was absolutely appalled last evening to hear Senator Messner castigate the Commissioner of Taxation for saying that some sort of fringe benefits tax is necessary. The Opposition criticised the Commissioner of Taxation for saying that, but it is not prepared to say what it will do. That is completely and absolutely irresponsible. Any thinking Australian knows that if one neutralises the fringe benefits tax, if one has no fringe benefits tax, one will open the system to the greatest tax rorts that this country has ever seen. We must have some control over fringe benefits if we are not to have virtually the whole taxing system in chaos. The Opposition has said it will neutralise the fringe benefits tax if it forms a government. It has not told us what it will do about fringe benefits, and how it will stop any rorts in this area. But it is not backward in criticising a hard working and, as far as I am aware, very efficient Commissioner of Taxation. The Opposition has had a good look at the tax reform package in the United States of America and it is not backward in pointing out the fact that the top marginal rate of tax in the United States of America is 33 per cent against our 49 per cent. It is not backward in pointing out that for an income of $30,000 a year in Australia the marginal tax rate is 40 per cent and in the United States it is a mere 15 per cent. To carry the comparisons a little further, for an average income level of $35,000 a year-that is not a high salary-Australia's marginal tax rate is 49 per cent and in the United States it is still 15 per cent. For a comparatively high salary by Australian standards, $62,000 a year, our marginal tax rate is still 49 per cent, and in the United States it is only 28 per cent rising to a maximum of 33 per cent. The explanation of why the United States can afford a top marginal rate of tax of 33 per cent lies in the different tax mix operating in the United States and Australia. To put some responsibility into this whole tax debate, we should look carefully at what goes on in the United States of America. It is all very well to say that it has a top marginal tax rate of 33 per cent, but let us look at what else is taxed in the United States. First, it has a broadly based consumption tax-sales tax-which operates at a State level and raises a large amount of revenue for the State governments. Secondly, the Federal Government collects social security contributions at 7.2 per cent, on top of income tax. The nearest equivalent we have in Australia is the Medicare levy, which the Government proposes to increase to 1.25 per cent of earnings. Thirdly, in the United States-this is very important, and I hope Senator Messner will listen-a capital gains tax is levied at the maximum rate of 33 per cent for individuals and 34 per cent for companies. However, unlike Australia, it makes no allowance for inflation. Consequently, the United States capital gains tax is much harsher than the Australian capital gains tax in its present form. For instance, if one had an investment in the United States and it appreciated at, say, 8 per cent a year for five years and inflation were running at 8 per cent one would have a capital gains tax on one's investment gain of 34 per cent over that five-year period. In Australia one would pay no tax at all, because if the inflation rate were running at 8 per cent, it would neutralise the 8 per cent capital appreciation. So there is no doubt that the Australian capital gains tax is very mild indeed by world standards. If the Liberal Party were responsible at all, it would acknowledge that fundamental fact. I come to the fourth difference between the American tax system and ours. I make these comparisons because it is very interesting that the United States had a tax reform package running at almost identically the same time as Australia's tax reform package was introduced, so it is very relevant to compare the two tax systems. The fifth difference is that in the United States a number of company tax concessions have been abolished, including the investment allowance and accelerated depreciation. The net effect of these abolitions of allowances in company tax has been to increase company tax by a massive $194 billion over five years. Although the nominal rate of tax in the United States has fallen from 46 to 34 per cent, the actual tax paid by companies will increase by 25 per cent. This is a factor that has to be taken into account. The sixth essential difference between our tax system and that of the United States is that married couples in the United States of America file a joint tax return. If they earn, say, $35,000 each, they are taxed jointly on their combined income of $70,000. The major difference between our system and that of the United States is this: In addition to the United States levying a sales tax, the majority of States also levy income tax, with top rates of 10 per cent. These taxes are in addition to the Federal tax. So what is the net effect of the mixes in the United States and the mixes in Australia? Let us look at the facts. According to the Organisation for Economic Co-operation and Development figures, in 1984 total taxation represented 31 per cent of gross domestic product in Australia compared with 29 per cent of gross domestic product in the United States. The figures would not be substantially different today because, although there have been changes, the tax packages in both the United States and Australia are revenue neutral. So it is fair to say that overall, on the basis of gross domestic product, Australians are taxed at a rate 2 per cent higher than people in the United States. However, I would have thought that there was not a great deal of difference. The Opposition persists with its policy of wanting its cake and eating it too. It continually draws attention to the top marginal rate of income tax in the United States of 33 per cent. Members of the Opposition say: `Whacko, let us do that in Australia as well'. They want the goodies without the nasties. I think they have adopted an irresponsible attitude in putting this argument before the public. The figures have to be looked at carefully. The Australian Democrats have been in the hot seat right through the debate on this tax package. Senator Messner —You poor old things. Senator SIDDONS —Nothing motivates Australians more than the hip pocket nerve, Senator Messner. It was a very easy and, I might say again, irresponsible attitude for the Opposition to adopt when it said: `We will just flat-footedly oppose the whole tax package'. Tax reform is necessary in this country. The Opposition has stood flat-footed and opposed the package without trying to draw attention to or come up with reforms in any shape or form. What is more, the Opposition has said that if it forms a government it will eliminate most of the package without telling us what it would put in its place. That is an irresponsible attitude to take. The Democrats have been put into the position of having to decide whether to join the Opposition in opposing the whole tax package which, without any doubt at all, would have precipitated a double dissolution earlier this year on the question of tax cuts, at a time when the Opposition would not have had any hope at all of winning an election. The opinion polls made that abundantly clear to the Opposition. The Opposition has played politics right throughout this whole tax package, as Senator Messner's secret memo indicated. For instance, it looked as though the capital gains tax legislation was going to be defeated and that the Government would have been given an excuse to call a double dissolution. Senator Messner said, in writing: `Well, we will get a few Liberals to cross the floor so that the capital gains tax in fact does pass'. If that is not playing politics, I do not know what is. Senator Messner's memo is in writing and he has not yet denied that he wrote it. It is in black and white, on the records and in Hansard. The reforms which have received so much publicity and for which the Government has taken so much credit are not the reforms that the Democrats would have liked to have seen. They are not the reforms the Government claims they are. However, we support this legislation. We have supported the tax package with the very important amendments that have been negotiated by the Democrats because they in fact lessen the tax paid by ordinary taxpayers and restores some sort of incentive by dropping the top marginal rate from 60 per cent to 49 per cent. The debate on this group of tax Bills has raised again the question of the fringe benefits tax. I want to comment on that tax. The Government in fact has conceded that there have to be changes to the mechanism by which the fringe benefits tax is applied. As I said before, and say again: Bravo, we told the Treasurer (Mr Keating) at the time we were negotiating the fringe benefits tax package with him that that had to happen. If we had had some support from the Liberal Party the fringe benefits tax would now be in a form which would be understandable to all Australians and which would be responsible. But no, the Liberals were going to oppose it flat-footed. The Liberal Party has not yet told us what sort of fringe benefits tax it is going to introduce. It has left it to the seven Democrats to do all the negotiating on the whole of this tax package. We tried very hard to get the Treasurer to agree to a flat tax on motor cars but he would not allow that at the time. He would not change the major thrust of his legislation and after having got a $200m concession, a concession that Senator Button tried three times to get in Cabinet but was rolled on it three times, we felt there was a limit as to how far seven Democrats could or should push a government. Senator Messner —So you caved in. Senator SIDDONS —I am giving the Opposition the facts of life. It does not like to hear them. It has never liked to hear them. The Government has finally conceded that it must simplify the fringe benefits tax. I want to put four simple reforms forward, which I hope the Government will think about and which will make the whole fringe benefits tax workable. The first is to scrap the car log book. I have told honourable senators that we tried to get the Government to scrap the log book. We put to the Treasurer that there should be a flat rate of tax on motor cars. If we had had some support from Senator Messner, who sits there and laughs about this now, the fringe benefits tax would not be in the mess it is in today. I repeat, we could scrap the log book quite simply. It is common practice for the Commissioner of Taxation to have a fixed formula for different occupations. For instance, the Commissioner could allow a plumber to claim 70 per cent of his car expenses. The Tax Commissioner may also lay down a formula which would allow an accountant to claim 50 per cent of his car expenses as a deduction. This is common practice and the Taxation Office does it right now. The Democrats can see no reason why formulas could not be laid down for different occupations, allowing interest and depreciation as a business expense. There is no reason why the Tax Office could not come up with a formula to apply to different types of businesses and business operations. This would greatly ease the administrative burden of the car tax and it would not affect revenue one iota. Secondly, to ensure that petty benefits, such as the provision of parking and other small payments in kind, are not hit, we believe there should be a threshold of $1,000 a year, and those receiving less than this amount in fringe benefits would not be taxed. At present the employer has only two choices with fringe benefits. He has either to pay or cash out the benefit. I believe this third option should be considered: The employer could declare the benefit on the employee's group certificate to ensure that the tax becomes the employee's responsibility. Deductions could be made from the weekly wage to cover any tax payable. In that way a very simple mechanism would allow the benefit to the employee to be taxed in the hands of the employee which, of course, in equity is where it should have always been taxed. The fourth reform we suggest is that the Taxation Office should be empowered to issue exemptions to groups which feel that they would be adversely affected by the fringe benefits tax. These would be organisations such as non-profit groups, say, the National Trust and the Royal Society for the Prevention of Cruelty to Animals. The RSPCA is very concerned that it is going to be taxed under the fringe benefits legislation and that will cause it enormous hardship and result in a great diminution of its services to animals in this country. If the Government were to take these four simple options, much of the heat over the FBT would be dissipated. These are practical, simple and straightforward suggestions. Senator Walters —By gee, what a backoff! I have never heard anything like it. It's a disgrace. Senator SIDDONS —Senator Walters refuses to concede that at least the Democrats had the moral fortitude to do something about a tax package. The Opposition has done nothing, has said that it opposes everything, and has not come up with one practical suggestion that I have heard of in this place in the last 18 months. Is it because the Opposition does not have any ideas, any brain power or is it because members of the Opposition cannot agree amongst themselves? Whatever the reason, the Liberal and National parties have been completely irresponsible over the whole tax package legislation. On that the record stands stark and clear. On behalf of the Democrats, I move: Leave out paragraph (a) of the words proposed to be added, insert the following paragraph: `(a) the Government should be condemned for- (i) not indexing personal income tax rates, which has allowed inflationary factors virtually to neutralise the Government's tax cuts, and (ii) very minor reductions in the marginal rate of tax at the level of the average income earner;' The one bright spot about the whole tax package is that the Government is not quite intransigent. It is a very good sign that it has been prepared to admit that changes are necessary to the fringe benefits tax, and that it is calling for submissions to see ways and means of simplifying such a tax. I hope that the Government will take note of the Democrats' suggestions in this area. If it can come up with a formula that simplifies the fringe benefits tax, if it is prepared to face up to the indexing of personal income tax, we will have a tax reform package that will put this country well ahead. It is the first time any government has been prepared to face up to the tax issue in 40 years. No government has been prepared to grasp the nettle in all that time. Senator Walters —It has made a botch of it. Senator SIDDONS —It has not made a botch of it at all. If I may use the honourable senator's words, it has made a botch of the fringe benefits tax in its application. That a fringe benefits tax was required is beyond doubt. One just has to look at the amount of revenue that has been forgone through tax rorts in the fringe benefits area. As an employer myself I can vouch for the fact that enormous amounts of revenue have been forgone through the rorts in the fringe benefits area. They had to be clamped down on. The fact that the Government did it in a ham-fisted way is a pity, but there is, at least to us, some glimmer of hope in the Government more or less admitting the error of its ways. If it can now come up with a fringe benefits tax which is workable, with a mild capital gains tax and with other reforms in the whole tax package, Australia will be set on a course that should be sound for many years ahead, at least through to the end of this century. Senator ALSTON(Victoria)(9.49) —One of the most predictable aspects of the constant struggle for the hearts and minds of the electorate is the enthusiasm of governments to massage that most delicate anatomical portion of the body politic, the hip pocket nerve. The most popular snake oil remedy is undoubtedly tax cuts. Like most public policy questions there are two schools of thought: One sees tax relief as a tangible short term gesture for which the voters at the next election will be duly grateful; the other sees significant reductions in personal income tax as a macro-economic tool to restore incentive, lower labour costs, raise disposable income, and boost aggregate demand. Unfortunately, this legislation is definitely a product of the former school-fiddling at the margin; at best, too little too late; and, at worst, a feeble and cynical sleight of hand trick. This shabby act of legerdemain must be exposed. Even after the 1 December tax cuts and taking into account the Medicare levy, the dependent spouse rebate, family allowance and the effects of inflation, families with a single breadwinner and two dependent children will still be $23.50 a week worse off than they were at the last election, in 1984. Taxpayers on average weekly earnings would need an extra $8 a week to be brought back to the March 1983 average tax rates. Over the last three years, the excise on a litre of petrol has risen from 6.1c to 19.7c. That is an additional cost of $6 a week in petrol for the average family. Even after both stages of the tax cuts are in place-after 1 December 1986 and 1 July 1987-both marginal and average income tax rates for taxpayers on average weekly earnings will be greater than they were in March 1983-a watershed date, one might think, in retrospect. Once the new rates are in place, a taxpayer on average weekly earnings will face a higher marginal tax rate and a higher average tax rate than he faced at the end of the Fraser Government's term in office. In March 1983 the marginal tax rate was 30c in the dollar. It is now 46c in the dollar. Even with these very feeble changes, by July 1987 the marginal tax rate will be 40c in the dollar. In terms of average tax rates, in March 1983 the rate was 22.9c in the dollar; it is now 46c and by July 1987 it will be 24.5c. Again, the average taxpayer will need a cut of $8 a week just to stay level. These increases in personal income tax rates do not include such iniquities as the fringe benefits tax, the capital gains tax, the abolition of negative gearing and the taking away of concessional expenditure rebates, as well as the numerous increases in indirect tax, including the increase in the petrol excise. Despite the assurances of the trilogy, tax receipts have risen from 25 per cent of gross domestic product in 1984-85 to 25.2 per cent in 1985-86. They will rise again, to 25.5 per cent, in 1986-87. The Government expects to raise $1,400m in tax as a result of that breach of commitment-one might call it the wages of sin. The world's second worst Treasurer is now the world's greatest tax charlatan. Even Australian Council of Trade Unions Vice-President MacBean has cast doubts on whether tax cuts will help those with an income below $28,000. That is hardly the sort of approach one might have expected from a Labor government. It will certainly be of no benefit to the masses. By July 1987 about two million additional taxpayers will have moved out of the new 29c in the dollar tax bracket and into the 40c bracket, which will mean that 50 per cent of all taxpayers will be in the top marginal rate bracket. This is the insidious bracket creep which enables governments to go on spending more and more and make apparent but illusory tax cuts. The Government's share of the national cake has risen from 31.6 per cent in 1972 to be now around 45 per cent. In 1984-85 the total number of taxpayers grew by less than 4 per cent, but the number in the top bracket grew by more than 33 per cent and the number in the next bracket by more than 32 per cent. With no adjustment, more and more Australians will be forced into higher and higher tax rate levels and will be faced with progressively savage tax bites which will be compounded by our-very impressive in terms of numerical order of magnitude-inflation rate which, as we all know, is well above the average for Organisation for Economic Co-operation and Development countries. It is a factor of four times greater than rates prevailing in the United States and Japan. These wimpish, anodyne tax cuts will do nothing to correct the fundamental distortions of our personal income tax structure, with its massive reliance on personal income tax and all the implications for disincentive effects. The Liberals will be moving fundamentally to correct that position. I now want to consider the international situation. The proportion that personal income tax, as a percentage of total tax revenue, provides in Australia is 45 per cent. One can compare that with figures of 39 per cent in the United States, 24 per cent in Japan, 27 per cent in West Germany, 33 per cent in Canada and 35 per cent in the United Kingdom. The Organisation for Economic Co-operation and Development average is 32 per cent. So the Australian figure is 40 per cent higher. Our personal income tax revenue as a percentage of total tax revenue is the fourth highest in the Western world. In terms of percentage of gross earnings for families with two children, we come in sixth, or, if one takes out the Scandinavian countries, we are third on the list. Total tax revenue from individuals in this financial year will be $32.7 billion. Total tax revenue will be $58.3 billion or 55 per cent. Currently the highest personal income tax percentage of total tax revenue occurs in New Zealand, but New Zealand has taken corrective action. It has moved away from an excessive reliance on personal income tax. It has had the courage to introduce what we would describe as a broad-based consumption tax. In New Zealand it is called a goods and services tax. It involves a 10 per cent tax on consumption. New Zealand at least has learned the error of its ways. The average tax rate in New Zealand will be 21 per cent, whereas in Australia it will be 25 per cent. In New Zealand the marginal tax rate on average weekly earnings will be 30 per cent. In Australia it will be 46 per cent. If we look at the 1984 OECD figures on consumption tax as a percentage of gross domestic product, again we find that Australia derives only 8.7 per cent of its revenue from consumption tax. In Japan the figure is 3.55 per cent and in the United States, 4.58 per cent. The European Economic Community average is 12.25 per cent. The Australian figure is therefore 40 per cent lower. General consumption as a percentage of GDP in Australia is 2.37 per cent, which is less than half the OECD average. Australia has the lowest figure of all OECD countries. Instead of the Government biting the bullet on option C, as we recommended, and moving towards a broad-based consumption tax, we now have such iniquities as the substantiation maze, with all the receipt books, log books and bits of paper that will make Australian taxpayers so unproductive and so infuriated in the run-up to the next election. We are doing our very best to create a nation of paper shufflers, amongst whom the rewards will be greatest for those who are prepared to engage in what is essentially tax fiddling. There is an absolute disincentive effect on any productive activity. The fringe benefits tax and the capital gains tax are punishment for those who might have been brave enough but who now would be foolish to take entrepreneurial risks. In delivering the 15th annual Wilfred Fullagar memorial lecture at Monash University recently, a noted tax expert warned of the inevitable collapse of the income tax system and predicted that `the future belongs to consumption taxation'. Professor Ross Parsons was a member of the 1975 Asprey Taxation Review Committee and is a founding governor of the Australian Tax Research Foundation. These are his words: There is no relief for us save for the coming of the ultimate state envisaged by the Asprey Committee, when the income tax has been abolished in favour of what can be a simple tax on goods and services. But this Government is not interested in real tax reform. In the corporate tax area, there will be a movement upwards from 46c to 49c in the dollar. The effect of that will be that only two countries in the Western world will have higher rates of corporate taxation on distributed dividends than Australia-France and Ireland. Their rate will be 50c. So one could say that we are right at the top of the table when it comes to corporate tax rates. One could say that there are pressures and reforms sweeping the world and one would have thought that these initiatives would have a great deal to offer Australia. But tragically that is not the case. Mr Hawke, as recently as 10 October this year-he was slightly provoked by John Howard suggesting that there may well be some real merit in recent United States tax reform initiatives-said: The sweeping reforms of the Australian tax system brought in by my Government will produce a fairer and more efficient tax system. There is no need for this Australian Government to look to the American reforms as a model for Australia. That almost verges on the tragic. I noted with interest that Senator Siddons dismissed the United States position by simply pointing to some of those differences which he says make the comparison irrelevant. But I remind the Senate that, even with the massive simplification and collapsing of the marginal rate structure, Americans will still be able to deduct housing mortgage interest rates; so middle class America will still have a sizable deductibility buffer to reduce the real burden of given nominal tax rates. Thus the effective real burden of high marginal tax rates will be a lot higher on middle income earners in Australia than in comparable countries overseas. It is quite clear that in Australia we have an inward looking approach, a pathetic myopia. Even in today's Age Max Walsh talked about the United States positivists. To paraphrase the Managing Director of Elders IXL, Mr John Elliott, what Max Walsh might have said is that in America the optimists run the country while in Australia it is the pessimists. A couple of leading tax experts in this country have warned that the Australian tax cuts are too small. That even seems to be the position of the Australian Democrats, who are proposing an amendment to the effect that the Government should be condemned for its very minor reductions in the marginal rate of tax at the level of the average income earners. Even the Democrats seem to have a glimmer of understanding of the real situation. There are experts in this country who have made it very clear that the Australian tax cuts are derisory and are too small to avert the risk of Australian business being undercut by United States competitors. Professor Michael Porter, who has been running the Centre for Policy Studies at Monash University for some years, has recently been commissioned to prepare a national priorities project which will deal with real tax reform proposals, hopefully by early next year. Professor Porter has said-- Senator Gietzelt —We are not going to rely on him, surely. Senator ALSTON —I would hope that there is scope for some sanity in the debate and that what will come out of the national priorities project is a substantial move towards broadening the indirect taxation base and a substantial lowering of the direct tax base. Professor Porter says that it is feasible for Australia to adopt United States type reforms involving adjusting income and corporate tax rates and broadening the indirect taxation base. I do not have any doubt that Australian companies would be prepared to wear the same increase as has been introduced in America if they could be sure that all the other factors in the equations would be beneficial. But at the moment they are simply of the view, as reported in this morning's paper in an address to a management survey, that Australia is about the last place in the world where corporate entrepreneurs would want to invest. Professor Porter says that the starting point is the threshold below which Australians are not charged income tax. That threshold currently stands at around $5,000 and below that figure there is something of the order of $40 billion a year in untaxed income. It is quite feasible to have a compensatory facility to look after those who are genuinely disadvantaged by the application of a tax rate below the current threshold level. Senator Gietzelt —It should be raised, not lowered. Senator ALSTON —If it is simply raised, the tax base is being narrowed, which I think is the last thing that is necessary at present. Presumably one would then have fewer and fewer taxpayers being asked and expected to pay more and more tax, but in reality doing the opposite. One would drive productive activity underground, ensure that the black economy is the only growth industry and ensure that most people are able, as they always have been, to avoid paying the higher rates of income tax. Professor Porter has said that the United States package provides a tax exempt income threshold of some $2,000 for single people and $5,000 for married couples, which he describes as minuscule on the basis of much higher average incomes in the United States when compared with the levels at which the top rates were introduced. It is clear that, if the original purpose of top marginal tax rates was somehow to ensure that those at the top of the tree were paying a much larger slice, any such rationale has long since disappeared. The most illuminating example I can think of is the fact that 25 years ago Australians would have had to earn $170,000, in current dollars, to qualify for today's top marginal rate of 60 per cent. Put another way, something like 15 years ago one would have had to earn about 11 1/2 times average weekly earnings, whereas today it is about 1 1/2 times. The very last people who should be paying the top marginal rate of tax are those on or about average weekly earnings. Yet we find that once these magnificent reforms are in place, more than 50 per cent of total taxpayers will be paying the top marginal rate. If one compares the two systems it is clear, in the words of Dr Ian Spry, who is another noted taxation expert in this country, that the United States operates a much broader system than Australia, with rates set at lower levels, and that the introduction of a similar system here would mean cutting the rate on a narrower range of taxable items such as petrol but imposing a lesser rate of tax on a much wider range of consumption goods. As Professor Porter has repeatedly pointed out, the threshold is the problem. I therefore want to examine the effect of the threshold for a moment. The problem with the tax free threshold is that there are very many income earners or recipients in this country paying no tax at all. We have already seen that something of the order of $40 billion is tax free below that level. It is clear, therefore, that unless some move is made to garner those funds, even at modest rates, the capacity for introducing lower marginal rates, certainly at the higher end, is very much constrained. If one abolished the tax threshold altogether, for example, at a rate of 20 per cent, the amount yielded would be an extra $6.6 billion, which would easily pay for the overdue reduction in the current marginal rates. Even with a compromise tax free threshold of $1,000, a 20 per cent tax rate would raise $5.3 billion or more. The raising of the tax threshold from $4,595 to $5,100, as we have in this legislation, runs counter to the current move to find revenue sources to allow for a reduction in high marginal tax rates. Income tax, including company tax and FBT, will actually increase from 67.5 per cent to 69.1 per cent of total tax revenue. This reflects strong increases in direct taxation stemming from the operation of bracket creep. Australia is once more going in the opposite direction to the rest of the world and the opposite direction to the imperatives of economic logic, and it will reap its ultimate reward. The effect of the Budget, as we have all seen in the assessments of commentators, is that by a very devious mirrors and beads trick the Treasurer was able to achieve a Budget deficit outcome of $3.5 billion. But he did not do that in the manner most thought he would do it-by the reduction of real expenditure. He did it by imposing a whole range of new taxes which will raise something of the order of $1.4 billion, by currency speculation by the Reserve Bank of Australia, which had classic windfall one-off profits of $600 billion, and something of the same order by the miserable deferral of welfare increases until 1 December. The Liberal Party, as I said, will go in the opposite direction. We believe in a lower, simpler and more durable tax regime. We will rationalise and broaden existing indirect taxation arrangements. We will reduce higher marginal rates of personal income tax and we will provide a bias in personal income tax in favour of families. It is quite clear from the shallow and superficial proposals contained in the Bills before us that Australians will not be any better off. This legislation is another feeble gesture in the direction of the next Federal election and will be forgotten long before then. The Government will then be faced with explaining why more and more people are paying more and more tax. I turn now to the Medicare Levy Bill. This is a fundamental example of the Government's ill-considered approach to revenue raising. One would have thought that the levy would be designed actually to assist the Government in containing and affording the increases in health costs in this country. But the fact is that, firstly, it is a very deliberate breach of an election promise. Perhaps we should not be surprised at that. One does not charge governments with false and misleading advertising; one simply assumes that leaders of political parties can be relied upon to honour at least the majority of their election promises unless there is a very good reason to the contrary. But this Bill involves a cold, cynical and deliberate action of breaking a promise not to increase the Medicare levy. It is now an empty charade to pretend that the levy is related to health costs. In many ways this Bill is a measure of the desperation of this Government and its absolutely critical need to raise revenue by whatever means for general budgetary purposes. There is no defined link between the levy and health costs; it is just a tax by another name. In 1985-86 total health costs were $3,634m, which consisted of $2,589m for medical benefits and $1,045m for public hospital costs. Revenue from the levy was $1,335m, which is about 35 per cent of total health costs. In the current Budget the estimated expenditure will be $3,939m-which is an increase of less than 10 per cent-yet the levy is to be increased by 25 per cent. The reason for this must be patently obvious: The Government long ago gave up the battle to control the explosion of health care costs. It must now stand condemned for its abject and total failure at cost containment policies. There has been a belated effort to tackle some of the massive overservicing and excessive charges in areas such as radiology and pathology but by and large as long as we retain a health care funding program which does not require consumers to take any real interest in or scrutiny of the manner and level of the charging we will get what we deserve-increasing health costs for no real or apparent increase in health. The real vice is the absolute lack of any incentive for patient scrutiny or involvement. Consumers can afford to remain ignorant and apathetic because they know that the tab is being picked up by the Government. They cannot labour under the illusion that it is a free bite; they know full well that it is not, as should the Government. Cutbacks in government funding for the health sector inevitably will have to follow unless costs are contained. The concept of the levy is fundamentally flawed. Unless and until it is related to some form of user pays principle we will simply see health costs running much further ahead of government than the Government might hope to catch up with any increase in the levy. Good health might be a priceless asset in this community; health costs certainly are not. The greatest beneficiaries of the current arrangements are the health providers. The users of the most expensive and sophisticated biotechnology are simply encouraged by the system to provide for average Australians the very best of hospital and medical care irrespective of the consequences. There is no incentive to use sparingly when there is no real cost burden applicable or, in economists' terms, there is no incentive for maximising behaviour. It is possible that one day the Government will move towards such vehicles as health management organisations. It might require Australians to take out cover for only catastrophic health costs. But there is no sign of it in this Bill. It is clear that unless competition amongst providers is introduced we will simply encourage consumers to go on in an undisciplined use of services. Consumers will be encouraged to demand the best. No-one will care particularly what it costs, except the Government when it is thrown out at the next election. I shall briefly address some of the comments of Senator Maguire, if they are meant to be representative of the Government's defence on these Bills. He talked about horrifying inflationary consequences. It is a pretty shabby and specious approach to say that indirect taxes will have any sort of permanent inflationary effect. They may well have a one-off effect and certainly would have that effect with full wage indexation. Now that it, mercifully, has been abandoned there is no necessary reason why there should be any significant increase in inflation. After all, if we were trading a broadening of the income tax base for substantial tax cuts, the average weekly wage earner would have a higher level of disposable income so as not to need any adjustment to his wages. It is claimed that these cuts will restore progressivity to the tax system. I think that myth disappeared long ago. It is clear that once there are punitive rates of marginal tax inventive Australians-perhaps inventive citizens of the world-will find ways and means of avoiding payment of such rates. The suggestion of the redistribution of the tax burden to lower and middle income wage earners is simply jargon and rhetoric. To demolish that suggestion one can do no better than to refer to the words of John MacBean, who said one has to earn more than $28,000 a year to get any benefit from even these miserable marginal rate reductions. In essence, the legislation is backward looking. The Government's approach is an obsession with the historic environment. It is really not much comfort. The Government will not gain any credibility by pointing to what might have happened in bygone years and suggesting that for some reason or another other governments have not been able to bite the tax bullet. Australia's predicament is greater than it has ever been before and there is no reason why genuine and substantial changes in the income tax structure cannot be introduced. The Government has not done this. Where I come from this is called gutlessness. Perhaps in this place it should be called a lack of intestinal fortitude. Unless this Government is prepared to adopt a tax regime that restores incentive and rewards those who are prepared to go out and strive, it will be left with more and more taxpayers being brought into the top marginal tax rate. The Government will therefore attract all the odium it deserves and will get the deserved result at the next election. Senator WALTERS(Tasmania)(10.18) —There is without doubt a general recognition in Australia that there is a tremendous crisis in our economy. Yet the Government's answer to that is the introduction of a whole new spate of taxes. The Treasurer (Mr Keating) told us that we are heading toward becoming a banana republic. The Prime Minister (Mr Hawke) told us that our economic crisis is so great that it is similar to the crisis we faced when we were at war. We all remember the Treasurer's banana republic statements and his statement that the Australian economy had fallen into a hole and that we cannot go on living beyond our means as we had done for some time. The Prime Minister said that we all have to pull in our belts, that the situation is so bad Australians have to pull together to get out of this crisis and that he alone cannot do it. The Opposition has been telling the Government for the last couple of years that this would occur, that its policies and its economic management of this country were not the way to go. Apart from the Opposition, many other people had been saying it, too. Indeed, Statement No. 2 of Budget Paper No. 1 of August 1985, at page 73, stated that a marked deterioration in the terms of trade was expected. What did the Treasurer say in September 1985? He said: . . . if we were providing these policy settings and outcomes in Western Europe, they'd be lighting candles to us in cathedrals. What is wrong with the man? The Treasury tells him what to expect, and he tells the Australian people that if he provided these policy settings and outcomes in Western Europe, people would be lighting candles to him in the cathedrals. He was out to deceive the Australian population, and that is unforgivable in a Treasurer. In November, a month or two later, he said: Notwithstanding the balance of payments figures from the early part of the financial year, the Government continues to expect a substantial decline on the current account deficit over the course of 1985-86 and subsequently. So despite Treasury warnings and Opposition warnings, despite the fact that the Opposition told the Treasurer daily that he was wrong, the Treasurer said that he expected a decline in the current account deficit. He would not take any notice of the Treasury or the Opposition. But what occurred? In April there was a current account deficit for the quarter of $3.5 billion. In particular, the figure for the month of April stunned the Treasurer and had him running for cover. We did not hear from him for 24 hours. He would not answer any media request for interviews. He just ran for cover and then came out with his banana republic statement. Yet the picture had been painted for many months. The picture had been painted over a period of years by the Opposition. We were all told by every economist that it would happen. We knew that it was occurring. But the Treasurer, like Nelson, turned a blind eye to what was happening and misled the population in an irresponsible manner. But I do not refer only to the Treasurer. In January this year the Prime Minister said: . . . I guess the range of options- that is, on the appropriate value of the dollar- is 72 to 75 cents. We all know what happened when the bottom dropped out of the dollar. The latest announcement of the balance of trade figures is horrific. The figures for the first quarter of the new financial year, for 1986-87, are the worst quarterly figures in Australia's history. The figure increased by 19 per cent when compared to the figure for the same quarter last year. Indeed, the current account deficit figure issued by the Australian Bureau of Statistics was $4,263m, which is an increase of $670m or 19 per cent on the deficit recorded in the three months ending September 1985. It is a record. What did the Prime Minister say? He said he was reasonably satisfied with the latest balance of payment figures. In a newspaper article he is reported as saying: The deficit result was within the range of market expectations and reflects the impact of the June and July devaluations of 10 to 11 per cent. He was happy with it. He said that the deficit result was within the range of market expectations. So if the expectation of the market is that we are going broke and that the whole country is in a dreadful mess, and if, indeed, that comes about, the Prime Minister just says: `That is all right. I am reasonably happy with it. It is in the range of market expectations'. What an incredible statement by the Prime Minister. Of course, not everybody agrees with him. John Spalvins, the Managing Director of the Adelaide Steamship Co. Ltd, said, although he did not name Mr Hawke, that he was quite surprised at how people had reacted to the current account deficit. He said: $1.45 billion sounds like a lot of money to me and I believe it is a lot of money. But perhaps we're getting blase. The financial markets and population at large seem to have accepted it. I'm personally quite concerned about it and I believe that we cannot continue spending something that we haven't got, and it has got to be corrected. Yet the Prime Minister passes it off by saying that he is reasonably happy about it. But let us look at what has happened since he made the statement that he thought the dollar had reached its proper level at about US72c. We all remember when the Australian dollar was worth 127.6 Japanese yen. That was on 15 April this year. It then started its slide in earnest. It went down to 95 yen at one stage. Everyone said it could not go below 100 yen, but it is still below 100 yen. I guess the Prime Minister is still quite happy, because that would reflect market expectations. The Australian dollar, as we all know, is called the Australian peso. This wonderful Treasurer, as was said the other day, only two years ago was called the financial Minister of the year. Now he has only narrowly been beaten for the wooden spoon award for the man who had done the most harm to any economy. He was only beaten for the wooden spoon award by the Finance Minister for Egypt. That is the level we have reached under this Government. This country is facing a crisis of world stature. Apart from our dollar reaching the peso level, what else has happened? The 1986 Budget which was brought down by this Government was not a Budget of great cuts; it was a Budget of great taxes. There have been a few deferments of pensions for those who are least able to cope in the community. But it was a Budget of taxes, not a Budget of government cuts. Let us look at what the Prime Minister had promised us. The Prime Minister said: We will undertake to be able to meet our objectives- of the trilogy- by ensuring restraints on the growth of expenditure; that is government expenditure will be beneath the rate of growth in the economy. What happened in this Budget? Government expenditure went up by $4.8 billion; and even if one takes inflation into account, it has still gone up. The Prime Minister said in a speech to the Melbourne Chamber of Commerce: I give you, a critically important audience, the categorical assurance that there will be no overall increase in the tax burden next year or through our next term of office. What a promise to be broken! Nothing but tax cuts have been mentioned, yet in the Budget we have had nothing but increases in taxes. The Medicare levy will be increased, and surely government members do not consider that that is not a tax. We have a fringe benefits tax, a capital gains tax, the quarterly payment of provisional tax is being brought in, and we have the quarantining of interest rates on housing units. We have had the lot. Everything imposed will be an extra burden on the business community. All that these taxes have succeeded in doing is getting rid of small business incentives. All they have succeeded in doing is saying to small business: `The climate is becoming impossible for you to expand. You cannot expect to make a dollar, because if you do it will be taken away from you by the Government in the form of taxes'. Yet the Government and the unions are abusing the business world for not expanding. They are saying: `You cannot expect us to take less wages unless you expand', and so the vicious circle goes on. Unions are not just asking for investment and expansion; they are demanding as a quid pro quo that investment and expansion take place. Let us look at what has happened to the fringe benefits tax. Today we heard from Senator Siddons the most incredible speech that I have ever heard in this Parliament. He said that there is a limit to which seven Democrats can go to push the Government. That is the excuse he gave for not putting up amendments to the fringe benefits tax that would have overcome those unintended consequences that the Government and Mr Hawke are now facing. Immediately after the fringe benefits tax was introduced and on every day since in this Parliament the Opposition has brought more anomalies and more unintended consequences to the attention of the Government and the Democrats. We had letters in the most arrogant terms from Mr Keating stating that the tax would not be altered, that the free accommodation of people who were in private homes looking after disabled people had to be included in the fringe benefits tax for equity's sake. He would not back off. There was no unexpected consequences from which the Government would back off. Mr Keating said that the tax would continue. Now Mr Hawke has backed off and has acknowledged that there are unintended consequences. On Sunday Senator Walsh said that these consequences were not his fault, that he is not a draftsman, and that it was all the fault of the bureaucracy. He did not know that unintended consequences would occur. He relied on the draftsmen not to include them in the legislation. We have not been able to get an answer as to what directions were given to the draftsmen. Senator Walsh will not answer our questions. I would dearly love to know what directions the Government gave to the draftsmen, because I believe that it intended to pick up every single bit of money it possibly could, despite earlier promises from the Prime Minister when he said the following to the Melbourne Chamber of Commerce: . . . there will be no overall increase in the tax burden . . . The Government intended to pick up every single cent it could, and the Treasurer had no intention of backing off. Mr Hawke has assured us that there will be substantive changes-`changes in substance' he said. But Mr Keating has said that there will not be changes in substance; there will be only administrative changes. Senator Walsh, in his true style, ducks for cover and blames the bureaucrats. Mr Hawke is now backing off and saying: `We will extend the date for the payment of the fringe benefits tax, seeing that we will be reviewing it. We realise that 28 October-only eight or nine days left-will not be the date on which we will be able to enforce payment. We will now reset that date'. What date do honourable senators think he chose? He chose the eleventh of the eleventh 1986. That is a pretty emotive day for the Australian Labor Party, and I can assure it that it is just as emotive to change the date on which the fringe benefits tax is payable to that date, as 11 November 1975 ever was. Yesterday Senator Cook told us that we were all being subversive in criticising the economy, that we should not be criticising the Government on the way its economic policy has been going, that this was all undermining the country, and that we should all keep quiet and let ourselves go down the plug hole silently. He will never be able to stop the Opposition from bringing to the Australian people the problems they are facing, even if Mr Keating is willing to hide the facts, and indeed insists upon hiding them, until they eventually speak for themselves. The Treasurer has reached the stage at which he cannot any longer be trusted by overseas nations. Europe is not burning candles for him. Yesterday we were told that executives of Moody's Investor Services Inc. are furious at the premature leak of its controversial assessment of the Australian political climate. A telex from an Australian Associated Press correspondent states: They were shocked today to learn that the Treasurer, Paul Keating, read a copy of their report in Parliament . . . The Moody's spokesman stressed that the political analysis of Australia is not part of last month's credit review. He said it is a separate document, still in its draft stages. That organisation was stupid enough to give the Treasurer a copy of its draft. It thought that it could trust him when he came home. But because he was smarting from the fact that he was copping a bit of flak over just missing out on being given the wooden spoon as the Treasurer who had done the worst in terms of economic management, he leaked this international document. That is the sort of credibility that our Treasurer has on the international stage at the moment. He is someone who cannot be trusted to hold a confidential document which is only in draft form. He will leak such a document to his own advantage if he is smarting from being under attack. How on earth can Australia compete? Let me now turn to another area. We are told by the Treasurer that there is no way that we can get the prices we want for our goods on overseas markets, that other countries should be paying us more for our exports and that, until they do, we cannot compete. What a defeatist attitude. What we have to do is get out there and compete at the prices other countries will pay for our products. How are we going to do that if we cannot bring down our interest rates, inflation rates and increases in average weekly earnings to those of our competitors? Just let us compare those rates. Low interest rates are essential if business is to be able to expand and compete on the open market. The latest figures show that interest rates in Australia are 17.9 per cent; West Germany, 4.4 per cent; Japan, 4.7 per cent; the United States of America, 5.6 per cent; Canada, 8.4 per cent; and France, 7.1 per cent. How can our business compete with interest rates like that? It is not possible for it to do so. Mr Keating cannot say that people must pay us the price that we want so that we can keep living in the manner to which we have been accustomed. What we must do is compete at the price that other countries are prepared to pay. Our inflation rate is 8.4 per cent; West Germany, 0.2 per cent; Japan, 0.5 per cent; the United States, 1.7 per cent; Canada, 3.7 per cent; and France, 2.3 per cent. Again, how can we possibly compete when we have inflation rates that are so much higher than those of our competitors? It just is not possible for us to do so. Average weekly earnings in Australia have risen by 6.5 per cent. The rise in West Germany has been 3.3 per cent-almost half of that of Australia. The rise in Japan was 2.2 per cent; the United States, 2.4 per cent; Canada, 2.6 per cent; and France, 4.8 per cent. The Minister for Resources and Energy (Senator Gareth Evans) is yawning his head off. I find this to be typical of the whole of the Labor Government's approach to this situation. As far as it is concerned, this matter is a big yawn. This typifies its whole attitude. The Prime Minister said that he was reasonably happy with our current deficit, that he was reasonably happy that it was within the market predictions. He said that he was reasonably happy, when the deficit is the worst on record. Senator Evans, in his usual style, sits back in his seat and yawns his head off when I am pointing out that we cannot possibly compete, that our businesses can no longer compete because of our high interest rates, inflation rates and level of average weekly earnings compared with those of other countries. I would now like to point out something to the yawning senator and to the Australian Democrats. I suppose that the Democrats are less interested in this matter than even the Labor Party is because, while Senator Evans sits back in his seat yawning his head off, the Democrats are not even in the chamber for the debate. Senator Siddons said: `We did not ever really agree with the fringe benefits tax and the way in which it was all done but there is a limit to what seven Democrats can do to push the Government'. What absolute bunkum. They did not have to agree with the fringe benefits tax. They went along with the Government-they went along happily. They did not put amendments to the fringe benefits tax legislation. They were perfectly happy to support the Government. We have reached the stage where demonstrations are taking place all over the country against the tax; we have reached the stage where the rural community has said that it will not pay the tax; we have reached the stage where disabled persons are having to pay the fringe benefits tax on the free accommodation they give to people who are helping them. Now the Democrats say: `Well, we really did not ever believe that it was all right but there is a limit to what seven Democrats can do to push the Government'. That is disgraceful behaviour. It is time they woke up to what they are doing because they had the opportunity to join with us and knock back the fringe benefits tax. Senator PARER(Queensland)(10.46) —We are debating cognately a package of taxation measures-namely, the Income Tax Rates Bill 1986, the Income Tax Bill 1986, the Taxation Laws (Miscellaneous Provisions) Bill 1986 and the Medicare Levy Bill 1986. The Opposition will not be opposing these Bills. However, we will be pointing out to the people of Australia three things: First, the Government's taxation policy, in particular its fringe benefits and capital gains taxes, is causing damage and confusion throughout the whole community; secondly, the Government's failure to deliver tax cuts on 1 September 1986, as promised in 1985, has caused additional hardships to families; and, thirdly, this Government is the highest taxing government in history with tax receipts estimated to reach 25.5 per cent of gross domestic product. These Bills are supposed to represent the goodies of the Government's 1985 taxation package, so appropriately called RATS for short-reform of the Australian tax system. However, to call these Bills and other parts of the taxation package a reform is a sham. As everyone knows, the tax package was a deal worked out by the Australian Council of Trade Unions and the Prime Minister (Mr Hawke) behind the back of the Treasurer (Mr Keating) in a motel room on the other side of Lake Burley Griffin on the last night of the failed tax summit. It was, and remains, the failed tax package of a government that is obviously in decay. As I have said before, it is the tax package that the Treasurer himself did not want. Let me remind honourable senators of the Treasurer's statement of 19 September last year. Of course these days he is now not the world's greatest Treasurer. I understand he is the second worst. According to the Euromoney magazine, the world's worst finance Minister is Mr Sultan Abu Ali of Egypt but `the men responsible for economic policy in Yugoslavia, Morocco, Australia, even Malaysia, were all strong contenders'. So there it is-the second best tax option from the world's second worst Treasurer. Last year the Treasurer told the people of Australia: `We have set policies for growth'. What happened? This year we have had three quarters of negative growth; record interest rates; rising inflation, particularly when compared with the rest of the world, including our trading partners; stagnating economic activity; a massive current account imbalance which, annualised, could reach figures as high as $17 billion this year; and continued high unemployment. So much for the policies of growth in the tax statement last September. The irony is that the Government's own tax and budgetary policies are to blame for the slide we have suffered. The fringe benefits tax is nothing short of a disaster. The capital gains tax is throwing up new anomalies by the minute and the new sales tax measures announced in the Budget will add to inflation and increase business costs. We will have yet more petrol price hikes which will hit families the hardest and there is the further slug for Medicare, the disaster to end all disasters. For all this the taxpayers of Australia are going to get a few lousy cents cut from their marginal tax rates. These savings will soon be gobbled up by inflation and fiscal drag, such is the great reform of the taxation system delivered by what the Treasurer used to call this `can-do Government'. Last year we had the White Paper, the National Taxation Summit, the back down, the deal and the statement. We also had the Prime Minister's nine principles of tax reform, the so-called nine commandments. These were to be the basis upon which the Government was to deliver us our tax nirvana. Let us look at some of them. First, there is the principle that there must be no increase during the Australian Labor Party's term in office of the overall tax burden as measured by the share of gross domestic product taken by the Government in tax revenues. Senator Michael Baume —Strike one. Senator PARER —Yes, strike one. There is more to come. This was part of the notorious trilogy which we do not hear much about these days. What has actually happened? In the last two Budgets the Government has increased the percentage of tax collected as a proportion of gross domestic product. In 1986-87 the Government will collect $1.4 billion more in additional tax collections over the trilogy ceiling. Tax collections, as a proportion of gross domestic product, have gone up from 20 to 25.5 per cent in the last year-yet another broken promise by this Government. Let us look at the second Hawke principle of tax reform. Any tax reform must continue the process of providing cuts in personal income tax. The tax cuts in December this year and July next year will simply be giving back to people money that is rightfully theirs anyway. The cuts will be largely paid for by inflation-something which this Government knows all about- given that our inflation rate is several times higher than that of our Organisation for Economic Co-operation and Development partners, and approximately four times higher than, for instance, that of Japan and not by the bevy of anti-business taxes introduced by this Government. But the crucial point is that in spite of the Government's promised tax cuts people, particularly struggling single income families, will be worse off. When the Hawke Government came to office in 1983 people on average weekly earnings were paying a marginal tax rate of 30c in the dollar. After both lots of tax cuts for this year and next year those taxpayers will be forking out 40c in the dollar; an increase of a whopping 30 per cent. Similarly, with average rates of tax, both single income earners and families will be considerably worse off and unfortunately for the Government the people out there know that they are already worse off. It is a fact that since 1983 families on average weekly earnings are $23.50 a week worse off, and that figure includes the December tax cuts. For the Government to claim that it is delivering real tax savings to the taxpayer is just as fallacious as its claim that it is the tax nasties who are paying for the alleged cuts. The taxation treatment of families in this country is a national disgrace. According to a recently released Catholic Social Welfare Committee report entitled `Give Families a Fair Go', in the last 10 years the amount of income tax imposed on a family with four children living on average weekly earnings has increased 435 per cent, while wages have increased only 135 per cent. The report states that the deteriorating economic position of Australian families is also clearly seen when one compares over time the disposable share of earnings enjoyed by families. In two years' time an average weekly earner with a dependent spouse and five children will have nearly nine percentage points less in disposable shares of earnings than an average earner, with the same number of dependants, had in 1977. In contrast, an average weekly earner with no dependants will have two percentage points less in disposable share of earnings. Families, particularly large ones, are simply being discriminated against under the present tax transfer system. The crucial point is that most Australian taxpayers with dependants, especially single income families, will suffer a decline in real income by 1988, despite the Government's tax cuts contained in the Bills before the Senate. When the Treasurer was overseas trying to explain why he felt he had done a good job, one newspaper report stated that one of the reasons given was that he had effectively lowered the standard of living of people in Australia. So it ill becomes the Government to think there will be dancing in the streets on 1 December over the new marginal tax rates. Any tax cut, of course, is to be welcomed. But a tax cut partly paid for by new taxes simply is not going to be worn by the great majority of taxpayers. The cuts should give struggling families very little to cheer about. Of course the 14 new taxes imposed by the Government in its recent Budget are not the only imposts which make life so hard for income earners. As from a couple of days ago car users have been paying the Government an additional 14c a litre in petrol tax. Reports in todays newspapers would indicate that people are now looking at having to pay something like 70c for a litre of petrol in the not too distant future. Let us go to the fourth of the Prime Minister's principles of tax reform. It is that any reform must simplify the system so that all Australians can understand it more easily. I will not repeat the unparliamentary language used by the Deputy Leader of the Australian Labor Party in Queensland, Mr Tom Burns, when describing the simplicity of the fringe benefits tax. I believe the Leader of the Government in the Senate, Senator Button, is also, very understandably, having considerable problems with the complexity of the administrative requirements of this tax. We have had several hundred pages of new legislation, explanatory memoranda, purple booklets, surveys by the Australian Taxation Office, administrative rulings and the tax hotline, but still small business is furious and confused. The paperwork involved in complying with the fringe benefits tax has variously been described as a nightmare, as horrifying and so on. Now we have a multi- million dollar advertising campaign to sell the tax package to be paid for again, of course, by the good old taxpayer. I am intrigued as to what this selling program will do. Is the Government going to go out there and say: `This tax is going to hurt us more than it is going to hurt you'? I do not know how it is going to explain this ridiculous tax to the people. Claims that this tax is aimed only at the tall poppies are totally fraudulent. Senator Gareth Evans, the Minister on duty today in the chamber, will appreciate that when the fringe benefits tax is applied about 90 per cent of the blue collar workers in the remote mining areas will be affected by it. His colleague Senator Walsh has no hesitation in saying: `Cash them out'. The benefits cannot be cashed out. While talking on the fringe benefits tax I would also like to refer to a Government inspired report of the Maritime Industry Development Committee. At a time when we are urging people to increase their exports and trying to do something about our balance of payments, it is stated that the likely additional cost of the fringe benefits tax to Australian flag vessels will annually amount to $65,000 per ship. Here we are again penalising that very sector of the economy we wish to stimulate. The report of the Committee states: It is inconceivable that Fringe Benefits Tax should be applied to items essential that traditionally provided for all seafarers to perform their duties on board ship, e.g. victualling. The fringe benefits tax will apply to Australian flag vessels. It will not apply to foreign vessels coming to Australia. How on earth does one cash out a benefit such as that? There are no restaurants at sea. It is now over a year since the tax package was announced. In that time we have had a stagnant private investment, negative growth, and rising unemployment. What a record? The tax package has not done the job; in fact, it has done the reverse. The fringe benefits and capital gains taxes are a massive disincentive to business activity. The Government says that it wants more capital investment to turn around our massive current account deficit. It has not got a hope of achieving this goal while it bashes those groups who actually turn the economy around, or have the capacity to turn it around. Compliance with the new tax regime is costing business heavily. It is simply a waste of time and money. It will not provide genuine relief for taxpayers. I briefly refer to the capital gains tax with particular reference to the effect it may or may not have on farm-in arrangements. Senator Evans might have some new clarification on this, but the point is that a normal farm-in arrangement works in such a way that a person with a mining tenement may seek out a third party to come in and take a share in the mining tenement by carrying out certain exploration works. Money does not change hands. The question was raised by the industry: Does that farm-in attract to the original tenement holder a capital gains tax? The Treasurer attempted to clarify this. He made a statement on 6 August which probably confused people more than ever. In that Press release to the mining companies he said, among other things, that there had been reports, based on legal opinion, that people would be liable to pay capital gains tax in the year of the farm-in agreement on the value of future capital expenditure to be undertaken by the person farming-in. He went on to say that this was not the true position. Then he truly and thoroughly confused everyone concerned when he said: That market value (the up-front sales price) would depend largely on the balance of the expected future returns from associated mineral discoveries over the amount of the expenditure commitments required to realise those returns, and could be very low at the early exploration stage. That statement raised enormous confusion. I know requests have been made to Senator Evans and others to get this clarified. I have no idea where it stands. The interpretation by the companies was such that this could mean a number of things. It could mean that there was a capital gains tax on the amount paid. It could mean that there would be a capital gains tax down the track when it was found out whether the person or company that farmed-in made a future return. There is an element there of retrospectivity. If the person who farmed-in did have an expected future return would it be expected that the original tenement holder would have to pay a much greater capital gains tax. The Treasurer went on further to say: In an arm's length sale, where there is tension between the parties- whatever that means- involved in negotiating the up-front sales price of the part disposal, that sale price would, in the absence of other relevant information, be accepted as the relevant consideration for capital gains purposes. That contradicts what he said at the beginning of his statement. No wonder there was a state of absolute and utter confusion among these people. While industry was being told that there probably would not be any form of a capital gains tax-although the subsequent comments by the Treasurer certainly added to the great confusion-one company got a ruling from the Australian Taxation Office that it would have to pay a capital gains tax. Where on earth does the industry sit? The industry is still signing agreements, but there is a proviso in those agreements to the effect that agreements are conditional on there being no capital gains tax. The Prime Minister's final principle of reform is that any reform package must have widespread community support. What have we got? We have a veritable tax revolt on our hands as more and more people realise that they are being affected by the nasties, the Prime Minister's so-called unintended consequences, and the goodies will seem more like just compensation than real reform. These Bills are a cruel hoax on the people of Australia. The cuts in marginal rates prescribed by the Bills are illusory and the increase in the Medicare levy is a disgraceful broken promise. What is the Prime Minister's word worth anyway these days? The Bills do little to increase incentives to be productive since there have been no changes to the levels at which marginal rates cut in. These Bills deserve the support of the Senate only because without their passage the people who provide this Government with money to waste would be even worse off than they are now. We need to create an environment where wealth generation, individual enterprise and business investment are actively encouraged and rewarded, where our primary concern is how to create wealth rather than how to distribute it. Senator MICHAEL BAUME(New South Wales)(11.08) —I foreshadow an amendment I will be moving at a later stage in this debate. It will be an amendment to Senator Messner's amendment. It reads: At the end of the words proposed to be added, add: `(d) the government should be condemned for misleading Australians by claiming that meaningful tax cuts are being provided when they are in fact being neutralised by inflation; and (e) the average income earner after 1 July 1987 will pay a marginal rate of tax of 40 per cent compared with the 30 per cent rate paid at the time the Hawke Government came to power in March 1983'. That foreshadowed amendment strikes at the very heart of fraud involved in this Government's so-called tax cuts. Let us deal with this fraud. The Budget Papers reveal that total tax in this Budget will increase by $6.5 billion, or 11 per cent. That tax is rising to pay for the continuing increase in government spending which it has sought to hide by talking about its significant spending cuts. The Senate is well aware-but unfortunately many members of the Australian public have been deceived-that Federal Government spending is to increase to a record level in real terms this year even after accounting for inflation. That is why we need increased tax revenue. Clearly, the Government is setting off on a course which is improper, reckless and incredibly dangerous because by increasing its spending it is forced not only to increase taxes, as we have seen from the Budget Papers, but also to be a large borrower, to have a large impact on the money markets and worsen those factors which are bringing about the many economic problems which are manifested mainly in our disastrous external account-in the $32,000 a minute rate at which we are going into debt as a result of importing more than we export. Let us look at this total taxation revenue, at this need of the Government because it will not cut its own spending. All it cut in the highly publicised, so-called Budget cuts was what it planned to spend, not what it was spending. This increased spending which is up 6.9 per cent, or about $4.8 billion, is to be financed by increased taxes. These are not just taxes on big companies or rich people but taxes on ordinary Australians. Let us take pay as you earn income taxpayers as an example. The net pay as you earn income tax collection this year, according to the Budget Papers, will go up by $2.6 billion even after the so-called tax cuts about which the Government is trumpeting in this legislation. Those are cuts on which at one stage it had hoped to wrest an early election if its other misdemeanours had not caught up with it with the result that the Treasurer (Mr Keating) has been awarded the accolade of being the second-worst Treasurer in the world. Senator Archer —He is working on becoming the worst. Senator MICHAEL BAUME —As my colleague says, he is doing so and he is doing very well. Senator Messner —He wants to be at both ends of the scale. Senator MICHAEL BAUME —Yes, that is accurate. I would like to look at both ends of the tax scale pretty smartly. It is in the tax scale, apart from the scale of competence as a Treasurer, that we see an interesting contribution from the man whose greatest participation to the debate on tax in general has been the way that he has been a benefits rorter. The Treasurer's living away from home arrangements are extraordinary from a man who tells other people to behave but he fails to do so. Net pay as you earn taxation from ordinary Australian wage earners will go up in the Budget by $2.6 billion or 10.4 per cent despite the so-called tax cuts. Theoretically, these tax cuts will diminish the revenue that the Government would have had by about $1.4 billion. But how significant is that when the Government will still take $2.6 billion more in pay as you earn deductions? The increase for people who do not pay a pay as you earn tax but pay tax in other ways will be almost 15 per cent. This will happen despite the fact that farmers, a very big proportion of that group, will have much reduced incomes because of the disastrous consequences of both Government policy, which has belted farmers non-stop, and the difficulties with their terms of trade. Those figures indicating what the ordinary taxpaying Australian will be hit with excludes the Medicare levy. The levy is to be increased, effective from 1 December, from one per cent to 1.25 per cent of taxable income. As a result, the Medicare collections will increase by 23 per cent-by $1.6 billion. In the list of other taxes we see huge increases. The prescribed payments taxes are up $750m or 46 per cent. In going through the taxes in the Budget which hit Australians we see enormous amounts, multi-millions of dollars-$6.5 billion-of tax increases overall. That is an 11 per cent rise to pay for the Government's determination to keep spending, spending and spending on its programs which it refuses to cut. That is why the Opposition has continually said: The only way to have genuine tax reform is to cut government spending. This Government has neither the courage nor the determination to face up to its own left wing and cut out this great volume of expenditure which results directly in these huge increases of tax collections despite this so-called and much trumpeted tax cut which will come in in December as a result of this legislation. We should remind ourselves that these tax cuts were supposed to come in in September. They should be here already. They were part of a deal with the people of Australia under which the Government said that the offset to the workers of Australia for not taking full indexation earlier this year would be the tax cuts. The Government was being reckless in encouraging even the wage rise that did take place at a time when Australia was pricing itself out of world markets. But a deal was done that this tax cut would take place in September to offset the 2 per cent cut in the rate of the indexation rise in April. This is yet another example of the Government's breaking its word. This Government is simply untrustworthy. The Government should never have entered into that arrangement in the first place because it was only transferring the cost of that reduction in wages to a different group of people in a different way. It was making the business community pay a very large proportion of that tax cut. The tax cut is being financed by two things. Firstly, it is being financed by business taxes. This tax package is deliberately and determinedly anti-business, anti-investment and anti-employment and is helping to pay for the tax cuts. Secondly, the tax cut is financed from inflation, as Senator Messner pointed out. Fiscal drag and inflation are pushing people into higher tax brackets and making them pay higher total taxes despite the so-called tax cuts. Let us look at the impact of these tax cuts on the average family, on single income families and on a single person. I seek leave to have incorporated in Hansard two tables which I have shown to the Minister who was previously in the chamber. Senator Button —Where are they from? Senator MICHAEL BAUME —The tables were prepared by the office of the Leader of the Opposition (Mr Howard) from public information. In each case the source is given. Senator Button —The source is on the document? Senator MICHAEL BAUME —As I understand it, the source is on the document, although I cannot remember the specific details. Leave granted. The tables read as follows- MARGINAL AVERAGE TAX RATES FOR A SINGLE PERSON ON AVERAGE WEEKLY EARNINGS Hawke First Elected Last Election Latest Period First Round of Keating Tax Cuts Second Round Keating Tax Cuts March 1983 December 1984 June 1986 Dec. 1986 (f) July 1987 (g) AWE (a)... $370.3 $427.30 $466.00 $480.00 $494.00 Average Annual Earnings (b)... $19,310 $22,280 $24,300 $25,030 $25,760 PAYE Tax Payable (c)- Annual... $4,415 $5,355 $6,284 $6,179 $6,305 Weekly... $85 $103 $121 $119 $121 Average Tax Rate (d)... 22.9% 24.0% 25.9% 24.7% 24.5% Marginal Tax Rate (e)... 30% 46% 46% 43% 40% (a) AWE for full-time adult males as used exclusively in the Government's Draft White Paper on Tax Reform. Source: ABS Cat. No. 6302.0 (b) AWE x 52.14 (c) Using the personal income tax scales applicable at the time (d) PAYE tax as a percentage of average annual earnings (e) Marginal tax rate applying to AWE (f) Assumes 3% increase in AWE between the June and December quarters 1986 (g) Assumes Budget forecast of 6% increase in AWE through the course of 1986-87 MARGINAL AND AVERAGE TAX RATES FOR A SINGLE INCOME FAMILY ON AVERAGE WEEKLY EARNINGS (AWE) Hawke First Elected Last Election Latest Period First Round of Keating Tax Cuts Second Round Keating Tax Cuts March 1983 December 1984 June 1986 Dec. 1986 (g) July 1987 (h) AWE (a)... $370.3 $427.3 $465.9 $480.00 $494.00 Average Annual Earnings (b)... $19,310 $22,280 $24,290 $25,030 $25,760 Gross PAYE Tax Payable (c)... $4,415 $5,355 $6,280 $6,179 $6,305 Dependent Spouse Rebate... $1,030 $1,030 $1,030 $1,030 $1,030 Net PAYE payable (d)- Annual... $3,385 $4,325 $5,250 $5,150 $5,275 Weekly... $65 $83 $101 $99 $101 Average Tax Rate (e)... 17.5% 19.4% 21.6% 20.6% 20.5% Marginal Tax Rate (f)... 30% 46% 46% 43% 40% (a) AWE for full-time adult males as used exclusively in the Government's Draft White Paper on Tax Reform. Source: ABS Cat. No. 6302.0 (b) AWE x 52.14 (c) Using the personal income tax scales applicable at the time (d) Gross PAYE tax payable less dependent spouse rebate (e) Net PAYE tax as a percentage of average annual earnings (f) Marginal tax rate applying to AWE (g) Assumes 3% increase in AWE between the June and December quarters 1986 (h) Assumes Budget forecast of 6% increase in AWE through the course of 1986-87. Senator MICHAEL BAUME —I thank the Senate. These figures show very clearly what has happened to average tax rates in regard to the single income earner with a dependent spouse and dependent children. The figures have been referred to by other speakers in the debate. They show, for example, that when the Hawke Government was first elected in March 1983, the average tax rate paid by such a person was 17.5 per cent. But after the July 1987 tax cut, that is, after this tax cut and the next cut, the average tax rate will be 20.5 per cent-a significant increase. That represents a serious worsening in the tax burden of the single income earner on average weekly earnings with a dependent spouse and dependent children. The table shows that the average tax rate had gone from 17.5 per cent in March 1983 to 19.4 per cent by the December 1984 election, a substantial rise. By June this year the rate had gone up to 21.6 per cent. The upcoming so-called tax cuts will reduce the average tax rate from 21.6 per cent to 20.6 per cent and the second round of tax cuts will knock down the rate a bit further to 20.5 per cent. But the reduction in the average tax rate from 21.6 per cent to 20.5 per cent reduces only slightly the huge rise that has occurred. So an enormous net increase in the average tax burden of a single income family on average weekly earnings has occurred under the Hawke Government. So let us hear no nonsense from the Government, particularly from the loquacious, if inaccurate, Leader of the Government in the Senate (Senator Button) about what a great job the Government is doing in cutting taxes. With the tax burden increasing at such a rate, the Government has no case. It is talking through its hat and maintaining a tradition set by the world's second worst Treasurer. The marginal tax rate is showing an even more dramatic change. For example, the marginal tax rate for the type of family I have just discussed was 30 per cent in March 1983. It will be 40 per cent in July 1987 after the Government's so-called magnificent tax cuts. In other words, the marginal tax rate of someone on average weekly earnings will go up by something like a third. Yet the Government keeps trumpeting about the wonderful cuts that have taken place. Even after these tax cuts the average family will pay a much higher proportion of its income in income tax. One would need a further income tax cut of $15 a week to bring the income tax burden back to its March 1983 level for a person on average weekly earnings with a dependent spouse and dependent children. But we are not to get that $15. The Australian people have every right to say that they have been robbed of $15 a week by this Government, which has pushed them, deliberately, into higher tax brackets and then tried to pretend that it is doing something wonderful for them in reducing their tax rates. What a wonderful thing to do-to reduce people's tax rates so that they pay $15 a week more than they paid when this Government came to office. Let us consider what this tax burden means. When the Government came to office in March 1983, $65 a week was the burden on such a family. By June 1986 it had risen to $101. By July next year, when these great tax cuts come in, it will still be $101. In other words, there will be no tax cut whatsoever in money terms as a result of these tax changes. That is because fiscal drag will push people into higher tax brackets. So people in that category are now paying $36 more a week than they were paying when the Hawke Government was elected. The question of the impact of all this on families, in particular, is very serious, because on top of the increase in personal income tax, there is also the increased Medicare levy, the new and increased wholesale taxes on many goods and massive increases in petrol excise. So across a whole range of activities there is a mounting burden which the present so-called tax cuts go nowhere near removing. They simply nibble a little at the edges. As I said, the Government needs increasing revenues because it continues to spend more and more. Last year, for example, the rise in public sector demand, 4.1 per cent, was almost three-quarters greater than the 2.4 per cent rise in private sector demand. To what extent will public sector demand be cut this year if we are to have genuine tax cuts? One can have genuine tax cuts only if one cuts government spending. This year the Government is `fixing things' by `cutting' demand in the public sector. We have to acknowledge that the Government will diminish to some extent the rate of rise in public sector demand, but it will not really cut it. Public sector demand will rise this year by about 1.5 per cent. As a result of all these additional taxes and attacks, if you like, on the private sector's ability to operate, private sector growth, according to the Budget Papers, will be a minimal 0.5 per cent. In other words, the Government in the Budget Papers expected its demand to increase at three times the rate of private sector demand. Yet we heard a report from New York-as yet unconfirmed; the Government will not confirm it-that the Treasurer's senior adviser, Dr Barry Hughes, expects the 0.5 per cent growth in the private sector to be wiped out entirely. There will be no growth. So as a result of the anti-incentive activities of this Government and the taxes it has imposed on the business community there will be no growth in the private sector whatsoever. Yet public sector demand will increase by 1.5 per cent. Until governments genuinely cut their spending, which this Government refuses to do, they will not be able to cut taxes. Let us face it, there is a desperate need for tax cuts. In the United States real tax cuts are going through Congress. Sweeping and genuine reforms in the United States are knocking down that country's present tax scales of between 11 per cent and 50 per cent to a much closer range of between 15 and 27 per cent or so. This means that the world's wealthiest country will have the lowest top tax rate in the developed world. Apparently, under this Government, we do not have the capacity to go down that sort of track. Senator Button —They are pretty shonky figures, and you know it. Senator MICHAEL BAUME —These figures come from the Economist magazine. If Senator Button wants to call that magazine shonky, he is quite at liberty to do so. The interesting thing is that the need for a tax revolt is clear cut. Apart from anything else, if the Australian Government insists on maintaining a tax rate based against ability and incentive at rates far above those existing, say in the United States, we are going to have a brain drain. People will go to countries where they are not oppressed by a government such as the one that Senator Button is such a proud member of. He keeps mouthing the need for incentive and for the private sector to invest more and do more, yet all his actions appear to be aimed at pushing people off-shore and getting rid of them if they are good, well paid or well rewarded. He wants them to work but not to be rewarded. The dreadful thing that has happened in Australia, under governments of both persuasions-we have to recognise that-is that tax rates that were aimed at people who were rich now apply to people who are simply average income earners. That situation is intolerable. But what is even more intolerable is the Government pretending that it is doing something positive to solve that problem with a set of tax cuts which leaves those people paying so much more in marginal tax, average tax and in total tax. Back in 1956, 30 years ago, a taxpayer did not have to pay the top marginal tax rate until his income was eight times average weekly earnings. That income would be around $153,000 in today's dollars. The top rate now cuts in at less than double average weekly earnings, at about $35,000 per year. To pay for these continuing increases in government spending, tax rates that used to be reserved for the very rich now hit middle Australians, totally destroying their incentive. That is one of the reasons why the Opposition, instead of going down the track that the Government has gone down, is looking at the whole question of tax and is examining the many suggestions that have been made. One suggestion that appeals to me is the three-tiered system for personal income tax, with a 24 per cent, a 30 per cent and a 40 per cent rate, which is certainly well below the sorts of rates that this Government is talking about. It is interesting to note that this Government is not promising to pursue this whole question of diminishing personal income tax rates, which has long been a central plank of the Opposition's tax policy. We are determined that incentive be restored into the tax system and that Australians on normal sorts of incomes should not be paying tax rates that in the past were reserved for people who were rich. This creates the question, which has to be addressed, about what one does with the income in the tax free zone-up to about $5,000. This is a matter which I think governments of all persuasions should examine because, by having the exemption up to $5,000-odd, the exemption applies to people with large incomes as well as those with small incomes. The Government's failure to address this question of genuine tax reform of the rates is most unfortunate, parti-cularly in the context that it has pretended that it is set on a path of major tax reform. The reality is that the Government has done nothing to reduce the tax burden, which is increasing, and has done nothing to bring about basic reforms. When the Treasurer tried to introduce indirect taxes last year in order to provide at least an opportunity of reducing personal income tax rates in a genuine way-that is, if the receipts of indirect tax were not spent on bigger and bigger government spending-he was rolled by his own Prime Minister in a secret meeting over at the Lakeside Hotel. This Government is not interested in genuine tax reform and is not interested in cutting the tax burden. We have seen why-because it is interested in increasing total government spending further and further. I wish to add to the amendment already moved by Senator Messner and, therefore, I will move: At the end of the words proposed to be added, add: `(d) the government should be condemned for misleading Australians by claiming that meaningful tax cuts are being provided when they are in fact being neutralised by inflation; and (e) the average income earner after 1 July 1987 will pay a marginal rate of tax of 40% compared with the 30% rate paid at the time the Hawke Government came to power in March 1983'. The reality is that this Government is the biggest taxing government in Australia's history; it is the biggest spending government in Australia's history; it is the breaker of more promises than any government in Australia's history; and it has the worst record of creating expectations which it has no intention of fulfilling than any government in Australia's history. Once again it is presenting a sham to this place in that the so-called tax cuts are, in fact, a method of diminishing at the edges what is a major increase in taxation revenue. I am certain that the people of Australia will not tolerate a continuation of the sort of sham that this Government has once again presented to them on tax. Senator COONEY(Victoria)(11.37) —Speeches given so far by honourable senators opposite indicate that the Opposition believes that high tax rates were something that came in with this Government and that the percentage of the gross domestic product that went to tax was somehow made greater, in large proportions, since the present Government has been in power. I think Senator Maguire has already dealt with that matter very effectively by putting forward the Budget receipts of the Government in which Mr Howard was Treasurer. Those figures show that the tax proportion of GDP jumped from 23 per cent to 24.7 per cent during that period, which is not much at all below what it is now. If all the criticism that the Opposition has been making about the Government's approach in this area is correct, that criticism, those objections and that analysis are just as pertinent to the previous Government. Where does that get us? It gets us to the position that what we get from members of the Opposition all the time is a whole series of criticisms and propositions which can be easily made when the burden of office is not upon them, but which in any event is not replaced in any way by any proposition that could be dealt with here and now in debate. A suggestion was made by Senator Michael Baume, in which he echoed points made by Senator Alston, that the Opposition will go in for indirect taxes-consumption taxes- and that it will load up with indirect taxes those items of everyday life such as bread, butter and sugar. It will load up with indirect taxes the average things that everybody needs. How is that going to help the average citizen of this land if he has to pay extra for his bread, milk, tea, orange juice and so on? How regressive is it when the Opposition says that from now on the person who earns big money, the person who can best afford to pay, is not going to have to pay, but the poor old pensioner, the person on a low income or the man who gets out and works for his bread by the sweat of his brow, is going to be loaded up by having his bread taxed. Senator Michael Baume should think about that because I do not believe he is the sort of person who will make the honest man who earns his bread by the sweat of his brow pay more for that bread. I am sure that if Senator Michael Baume thinks about that idea he will reject it. We should not apply a consumption tax in such areas. We must look once more at the progressive and enlightened journey that this Government has taken on the question of taxation. Senator Michael Baume —You voted for an orange juice tax and a flavoured milk tax. Senator COONEY —But we have not taxed bread, the basic staff of life, which the Opposition intends to tax. The Opposition says that taxes have not been lowered, but from 1 December 1986 the existing rate of tax on income above $12,600 will be reduced from 25 per cent to 24 per cent and the tax-free threshold will increase to $12,600. As Senator Maguire so eloquently pointed out before-a brilliant speech-the lowest income tax rate under the former Liberal-National Party Government was 30 per cent. Yet our lowest rate is to be 24 per cent and the threshold will increase to $12,600. To say that that is not a reduction in the taxation system is to defy reality. One can go through all sorts of machinations, add this up, reduce that, get the calculator out and tap the keys and go through the process of producing figures. But that is all pointless when one comes down to the reality of the income tax rate being reduced from the 30c in the dollar which it was under the former Fraser Government to the 24 per cent rate which it will be. In addition, the threshold will be increased to $12,600. The 30 per cent rate will reduce to 29 per cent and the next two rates of 46 per cent and 48 per cent will be reduced. The maximum rate in the future will be 49 per cent. That is a very significant and praiseworthy effort. I turn now to Senator Messner's amendment concerning the Income Tax Rates Bill. It reads: At the end of the motion, add: ``, but the Senate is of the opinion that- (a) the Government's taxation policy, in particular its fringe benefits and capital gains taxes, is causing damage and confusion to business and farmers; (b) the Government's failure to deliver tax cuts on 1 September 1986 as promised in 1985 has caused additional hardship to families; and (c) this Government is the highest taxing Government in history, with tax receipts estimated to reach 25.5% of GDP''. The whole emphasis of the amendment is on reducing damage to business and farmers. It is praiseworthy to seek to do that. But what about the ordinary working man? He is not mentioned specifically in that amendment as are the business community and the farming community. What is wrong with giving him a go? He is the very person the Opposition expects to get us out of the present difficulty. He is the person the Opposition expects to take cuts in wages, to accept wage freezes and to suffer the rigours and the shortcomings that the Opposition says are presently in this community. In view of that, is it not fair for the business community to contribute? I pause at this point to say that I have great praise for the major part of the business community and the farmers. Business should accept its responsibility. If the ordinary working man has to make sacrifices why should not business? Many a businessman no doubt wants to do that. But what happens when they want to invest in Australia? They are loyal, patriotic citizens interested in their fellow Australians. They want to invest in Australia to get us out of this taxation problem that is foreseen as a difficulty we will face in the future? The Age today carries a report of comments of the National Treasurer of the Liberal Party of Australia. It states: Australian companies would be unwise to invest in Australia and would look overseas, Elders IXL chief Mr John Elliott told a Melbourne Management Week conference today. Those businesses which were prepared to invest in Australia would be acting on `emotional rather than hard logical reasons', he told about 400 businessmen. How are we as a nation to get out of our difficulties, to get over the problems that the Opposition says we have with these tax problems, if we do not get investment from business and if the National Treasurer of the Liberal Party goes around saying that business should not invest in Australia? Do Senator Parer and his colleagues accept that Australia should have a business community that will invest simply according to where the most opportune dollar will come from? Senator Parer —Yes. Senator COONEY —Apparently that is his position. Concepts such as nationalism, patriotism and trying to help fellow Australians apparently should not be taken into account. Would Senator Parer accept that? Senator Parer —Yes, and I think you would, too. Senator COONEY —I do not because I think that the business community, along with the work force, should make sacrifices. We have been called upon to make sacrifices, not only by the Government but also by members of the Opposition. They have criticised the union movement and berated the workers of this country for not making proper sacrifices. When one skerrick of sacrifice is called for from the business community the National Treasurer of the Liberal Party advises the Liberal Party, the National Party-the present Opposition-and the business community not to help Australia, not to show a patriotic streak, not to show any sort of compassion for their fellows but simply to go where they can get the best and quickest quid. Senator McIntosh —Where is their sense of fair play? Senator COONEY —As Senator McIntosh asked, where is their sense of fair play? Those people call upon the workers of Australia to make all sorts of sacrifices, to accept wage freezes for years, to take a reduction in wages and put their shoulder to the wheel. As soon as any sacrifice is sought from those people they go immediately to ground and say that they have to get out of the country, abandon the land of their birth and invest elsewhere so that other people can enjoy the fruits which should properly benefit Australia. This point was very well picked up. It was referred to earlier today by Senator Alston. There is a comment in today's Age by Maximilian Walsh. Talking about the difference in approach between the American business community and the Australian business community and referring to the American firm Reebok, he said: Reebok and its runaway success is an example of why the distinguishing feature of homo Americanis economicus is positivism. In contrast, the Australian equivalent often appears infected with congenital melancholia. Why is Australian business so depressed? Because the National Treasurer of the Liberal Party keeps coming out and saying that it has to be depressed. That is the great difficulty we face. Criticism of this Government sits ill in the mouths of members of the Liberal Party when their own party executive apparently is on a course destined to bring this country to ruin by urging that businessmen not invest unless investment is absolutely on their terms. To be fair to the trade union movement, it says that it would make the sacrifices required to bring prosperity to Australia if the business community would do the same. Senator Parer —When did it say that? Senator COONEY —That was stated by the President of the Australian Council of Trade Unions, Mr Simon Crean, last night. The answer he apparently gets is: `No, you make all the sacrifices and we will make none'. There has been great criticism, of course, about the fringe benefits tax and the capital gains tax. At the same time, great play has been made about the taxation system in the United States of America which, of course, has a very high capital gains tax which is not indexed for inflation. Senator McKiernan —That is where Elliott is investing. Senator COONEY —That is right. It has death duties and gift duties. Of course, it is the highest debtor nation in the world. The sort of proposition that is put by the Opposition is that we should follow America down the line, become the highest debtor nation in the world, impose death duties, gift duties and, of course, capital gains duties which are not indexed. The Opposition cannot have it both ways. It cannot in one breath say that we should look at America in terms of income tax rates, and in the next breath ignore it in terms of all sorts of other taxes. What we must do is look at the whole system. When one looks at the whole system, Australia comes out very well. That is not acknowledged by those on the other side. They simply select figures-that is what has happened this morning-to make out a proposition which, on their figures and their arguments, does not stand up. The lowest tax rate that could be delivered by their proposed future Prime Minister could not come anywhere near the lowest tax rate which has been, and will be, delivered by this Government. The other thing that should be mentioned about the tax package is this: The income tax Act will be amended to increase the taxable income level, at or below which the maximum pensioner rebate of $250 is available, from $5,595 to $5,914 in 1986-87, and to $6,142 in 1987-88 and subsequent years. The maximum levels of the beneficiary rebates will also be increased from $220 to $280 for married beneficiaries and from $170 to $190 for other beneficiaries. That is another aspect of the tax package which must be looked at. The argument to date mostly has been about how it affects those in the higher income brackets. This tax package delivers something for those in the community who are in receipt of the lowest incomes. That is the sort of thing that ought to be brought to notice very strongly, because it is the sort of thing that the Opposition keeps ignoring. It has been interested only in the higher tax rates. Senator McKiernan —Selective quotes. Senator COONEY —Selective quotes; that is right. It says, of course, that it will keep the tax rates that we have introduced under our tax reforms yet it will reduce the source of its money-except, perhaps, for some fairly savage impositions of consumer taxes. But if one looks at the explanatory notes of the original legislation on the fringe benefits tax, one finds, for example, that we are looking at collecting $330m in 1986-87, $540m in 1987-88 and $625m in 1988-89. Those are great sums of money which have to be replaced from somewhere. From which areas will the Opposition collect that money? Will it cut expenditure? If it cuts expenditure, where is the detailed list of those expenditure cuts? It is all very well to put forward a series of figures and propositions during debate. I submit that the sorts of things that should be put forward are hard policies, hard programs and hard figures, so that the debate can take place properly. It is not fair for the Opposition to talk vaguely about the areas in which it may make cuts. It says: `Expenditure is a problem. Let us cut expenditure'. In what areas will that expenditure be cut? It will be very interesting to hear from those Opposition senators who will speak in this debate-Senator Watson, Senator Short and Senator Crichton-Browne-the areas in which cuts will be made and the extent to which those cuts will be made. Senator McKiernan —And then their Leader will deny it, because they do not have policies; they are bereft. Senator COONEY —They do not have policies; that is quite right. They are bereft of policies. The next point that should be made about the propositions put by the other side is that they are developed on a false basis. If one looks, for example, at the company tax and profitability rate from 1979 to 1982, compared with the rate in 1985-86, one will see that the percentage of tax paid by companies in the last year of the previous Government was 25.5 per cent of the gross operating surplus. In 1985-86 the tax rate as a percentage of the gross operating surplus was 18 per cent. So the imposition of tax on companies by this Government is much lower than it was under the previous Government. I again make the point-- Senator Messner —That has nothing to do with anything. The whole basis of the surplus has changed. Senator COONEY —All I am saying is this: Opposition senators cite figures and make all sorts of submissions about the tax Act. They simply produce figures which are quite selective. I am illustrating that the Government can produce all sorts of figures to indicate that its system is much better than the previous Government's system. What the Opposition is doing the whole time is to machinate, using a calculator, to prove certain figures. All I am saying is that if one chooses other figures, one can prove to the contrary. Opposition senators have not been able to disprove that the tax rates, as set out in this legislation, are quite clearly lower than they were when they were in government. The top rate of 60 per cent has been reduced. The bottom rate of 30 per cent has been reduced. Opposition senators can go through all sorts of twists and turns and, as I say, get out the calculator and the books to try to prove that in some way the rate is increasing. But when one looks at the actual figures it is clear that this Government's tax approach has been very reformist. The other point that Senator Maguire made-again, the Opposition has not really mentioned it-is that the tax collected through such mechanisms as the fringe benefits tax is not tax which will go to government expenditure; it is tax which will go to allow for cuts in the tax rates. The argument really is about who should pay. The Opposition keeps repeating that only a particular section should pay. I am not referring only to who should make sacrifices, and the Opposition's approach to business, compared with its approach to the ordinary working person. The Opposition is prejudiced not only in that regard but also in regard to who should pay the taxes. The Opposition believes that persons who have for years enjoyed fringe benefits in some way should continue to enjoy those fringe benefits and those who have been deprived as a result should continue to be deprived. It says that a person who receives his income in cash-a person who receives income in the way in which most people in Australia receive income-should have to bear the burden of those who receive their income by way of fringe benefits, such as a free car, free education for their children and free credit cards. If one looks at the broad thrust of the tax package-which, in my view, one should-as distinct from particular examples which may be produced to show how a particular tax works unjustly in a particular instance, one will see that this Government has produced a package which will introduce tax cuts, and which is a very benign system. I think that Senator Messner would agree if he thought about it in broad terms rather than concentrating on particular examples, which we can always produce to show that a general rule acts in a bad way. In other words, to take a particular example, say, of somebody who is given a house in a remote area and the fringe benefits tax adversely affects it, is something that can be done in respect of any proposition that is put forward. On the other hand we should look at the general thrust, which is simply this: For anybody who receives remuneration, whether in cash or in cash and some other form, that remuneration should be subject to its proper income tax rate, and I think most people would agree with that proposition. Capital gains tax has been condemned in this place and it was stated that it should be abolished. Again, its abolition leads to all sorts of injustices. No doubt we can point to examples here and there where a capital gains tax may, in a particular instance, seem too burdensome. However, what about a situation where two people are earning, say, something like $60,000 a year and one person is able to convert $40,000 of it into capital, upon which there is no tax, and the other person has to pay tax on the whole $60,000? Is that fair? When it is put that way, it is quite clear that it is not and it becomes quite clear that that sort of tax is a reasonable tax for people to pay. As I have said, if one looks at the whole tax package and at the thrust of the system rather than at the edges, where one might find some specific examples that the whole tax package works badly, one can see that its thrust is good. Considering the sorts of propositions put forward by the Opposition, which tries to get away from the reality that there are tax cuts that will benefit people across the board and that this is the most major tax reform that has occurred in this country in living memory, one is entitled to say that this is a measure which the Opposition could not introduce. What it is now doing is trying to hack away and attack a system which is much better than any that it ever proposed. It is a system which stands against very vague propositions and very vague criticisms in the sense that that criticism is not worked out in specifics. This legislation will bring benefits across the board and it deserves support. Senator WATSON(Tasmania)(12.03) —Senator Cooney is not only a great lawyer but is also becoming a great parliamentarian. Time and again the Australian Labor Party pulls him into this chamber at an awkward time in order to defend the indefensible. I admire not only the honourable senator's humour, his knowledge of the law and his parliamentary tactics, but also his stamina. Time and again he has to come in here, under great difficulty and great duress, and defend the indefensible. I thank the honourable senator for his contribution to this debate. It has been interesting and informative. I acknowledge Senator Cooney's Party's contribution to taxing orange juice. I acknowledge his Party's contribution to taxing flavoured milk, and so on, and I acknowledge his frankness in saying that his Party has not yet levied a tax on bread. After all, bread is the staple diet of the ordinary working man. I believe that Senator Cooney has a great understanding of the ordinary working man and a great feeling towards such people, but I remind him that it is those very people who are now walking away from the Labor Party. I commend the honourable senator on his ability to try to bring them back to the fold. As the honourable senator well knows, the needs of the ordinary working man go well beyond the requirement of bread. From the honourable senator's knowledge of his needs and as a devoutly religious person, he would also know that man cannot live by bread alone. I remind honourable senators opposite that man also needs water from time to time. However, the Labor Party has now levied a fringe benefits tax on fresh water that is provided to the people of the defence forces who work at Woomera. So the Labor Party is getting pretty close to taxing bread. On a more serious or less flippant note, the Senate is debating the Income Tax Rates Bill 1986, the Income Tax Bill 1986, the Taxation Laws (Miscellaneous Provisions) Bill 1986, and the Medicare Levy Bill 1986. The Medicare Levy Bill will increase the Medicare levy by 25 per cent. We have been told that this range of Bills is aimed at producing tax cuts. There are a few tax cuts, but we do not hear about the people who will be paid $4m or $5m to sell this package. Fancy having to sell a package of tax cuts to the Australian people! The Government has to pay an advertising agency $4m or $5m to tell Australians how much better off they will be because of the tax cuts. What a waste of taxpayers' money! What a futile exercise! The Labor Party is singing its own praises about tax reductions, but a simple analysis will show that taxes have not gone down; they have gone up. No wonder the Government has to employ consultants to try to con the Australian people when taxes have actually gone up under this Labor Government. I remind the Senate that not only did the Labor Party fail to deliver the income tax cuts when they were promised, in September, but also next year the prospect of the remainder of the package being delivered is remote indeed. One only has to analyse the Budget to find out the impossibility of the Government delivering the remainder of the tax cuts unless it bites deeply into expenditure and unless it finds some new form of revenue next year. The previous Budget was a short term expedient measure. It was geared for an early election that did not come off because of a slip of the tongue by the Treasurer (Mr Keating). Next year we will be faced with the prospect of higher, not lower, taxation unless we can see major reductions in expenditure. I cannot see a Labor government tackling such difficult problems when it has a history of walking away from difficult issues. As all my colleagues have said in this debate, and it stands out: The present Labor Government is the highest taxing government in the history of Australia, raising 25.5 per cent of gross national product in taxes. The Organisation for Economic Co-operation and Development tells us that the share of total Australian taxation which comes from incomes and profits as a percentage of the total tax burden is amongst the highest of the OECD countries. On the one hand the Government is instructing advertising agencies to tell the Australian people how much better off the electorate will be, yet the Australian Government is amongst the highest taxing governments of the OECD countries. We will not be told of that in the footage to the television commercials. Our percentage of total tax revenue collected by taxes on wages and profits is the fourth highest of those of the OECD countries. We are not a low tax country by any means. Even after both stages of the tax cuts have been implemented, the one for December and the one after that, the marginal and average tax imposed upon average earners-the very people to whom Senator Cooney was appealing, the people who live on bread and water-will be higher than when the Hawke Government first came to office in March 1983. How does that sound? The average tax rate and the marginal tax rate of the average wage earner will be higher after this tax package is introduced and after the promises have been fulfilled than when the Hawke Government first came to power. Under the last Liberal Government Budget the people of Australia were taxed $44,000m. In this year's Budget they are taxed $71,000m, an increase of 61 per cent in the space of four years. Of course, the Government is trying to reduce the deficit by imposing higher taxes. The average weekly wage earner with a wife and two children-these are Senator Cooney's constituents, the poor ordinary bloke with a wife and two kids in receipt of average or slightly below average weekly earnings-will be paying 20.5 per cent of his income in tax, as opposed to only 17.5 per cent of his total earnings in the final year of the Fraser Government. This does not even include the one per cent Medicare levy which is to be increased by 25 per cent as a result of this package of Bills. This increase is not mentioned when the Government talks about tax cuts. We never see that mentioned in the television footage in which the Government tells us how good its tax package is. The Income Tax Rates Bill will declare the rates of tax payable by individuals and trustees for 1986-87 and subsequent years. It will basically give effect to some nominal personal tax cuts as announced in the September 1985 tax package. We have had to wait a long time for those tax cuts, but we are used to doing that under a Labor administration. The Bill will allow the tax free threshold to operate only on a pro rata basis in certain circumstances. But what is the Government going to do? It is going to tax the youngsters who are just leaving school. The kids who are getting their first pay packet will be worse off from a tax point of view than their mums who stay at home and do a bit of occasional work. The Government is going to attack them on the threshold of their careers. The Government is after the votes of the 17- and 18-year-olds. However, I do not think these people will be too impressed when they get their first pay and find that they are being taxed on a basis which is far more savage than that which applies to their mothers who do a little bit of part time work. By 1 July 1987-and that is not too far off-approximately two million taxpayers will have moved out of this new 29 per cent tax bracket into the 40 per cent tax bracket. Two million people will go from 29 per cent to 40 per cent. By 1 July about 50 per cent of all taxpayers will be paying the 40 per cent rate or even higher. Yet, the Government is talking about tax cuts. I can tell the Government that it is camouflaging these cuts pretty well. Australia's unacceptably high inflation rate is responsible for tax bracket creep-the secret collector on which the Labor Party relies. It needs high inflation so that it can collect progressively more and more taxes. The Government is progressively reducing the real disposable income of ordinary wage earners by pushing them into higher and higher tax brackets as their income increases. So, in the absence of indexing taxes to inflation, bracket creep-and we all know that term-will erode the ability of Australians to save and to invest in productive enterprises. We are taking away from ordinary Australians their ability to save for the future and to try and improve their lot in life. I think the 1 December tax cuts will come at last. We have waited a long time for them. The Government has procrastinated and put them off. We will get the tax cuts but maybe we will not get the second instalment. Of course, the first hire purchase payment is always the easiest one to make. The other ones become harder to meet. So the December tax cut will provide only a temporary aberration from the tax bracket creep that arises from the Australian Labor Party's inflationary policies. We are talking about tax reductions. But if we look into this matter carefully, we find company tax is not going down-it is going up from 46c to 49c in the dollar. I have said before that we are not going to attract the productive investment that is waiting out there in Asia, the United States of America and Europe if we have a 49c in the dollar primary company tax rate. But we will get a lot of the speculative money coming in to buy and sell land, to buy up the farm and to buy a bit of real estate. But this money will not be invested in productive Australian enterprises-enterprises that will provide jobs for Australian people. At a time when the Labor side puts so much emphasis on reducing personal income taxes, I think it is hypocritical that in this package the Labor Party could have a Bill which increases the Medicare levy by 25 per cent-from one per cent to 1.25 per cent. Of course, this increase is counter to the 1984 election promise of the Prime Minister (Mr Hawke) not to increase the levy. Not only that, but this idea was reinforced by none other than the Minister for Health (Dr Blewett) as late as 7 March 1986, just a few months back, when he said that no consideration at all would be given to changing the one per cent Medicare levy and that the Government would be keeping to its election promise. It is no wonder that the people are becoming increasingly disenchanted with the Australian Labor Party because its leadership fails to keep its word and deliver on its promises. We have become accustomed to seeing blow-out after blow-out. Such scenarios are all too evident in Labor's administration of the economy. In the area of Medicare we have also seen a massive blow-out and explosion of costs. This levy is going to raise only $1,645m, leaving the Government to finance a $2,355m shortfall. In effect, if the Government were fully to finance this levy through taxation-and really it is financing it through taxation because that shortfall has to be met indirectly by taxation-the levy would actually be equal to 3 per cent. So, in reality, the levy is simply an additional form of income tax. The worrying part about the Medicare levy is that the gap between the levy and the cost of providing the service of Medicare continues to widen at an accelerating rate. As a result of this program, Australians will have a decreased choice of health care. We now have a cumbersome system with burgeoning cost. Only those who can afford to maintain private health care can now have a guaranteed access to a hospital bed when needed. So low income earners especially are now faced with long waits in public hospital queues. These are the sorts of people that I care about and that Senator Walsh possibly does not. Furthermore, the removal of the subsidy on private hospital beds I think is a false economy and a further implementation of socialist policies. I think it will drive up health insurance costs, forcing more and more people into the public health system which is unable to cope with demand. I had not intended to talk about the fringe benefits tax et cetera but as my colleagues on the Government side have already done so I therefore believe that I should respond. It has been said that the capital gains tax, the fringe benefits tax, et cetera, have played an integral part in causing some of the temporary decreases in tax rates, but they are certainly anti-business. A medium sized Australian company which has to provide telephones to certain of its employees for call-outs in the case of accident or for some other form of quick service, has had trouble in working out the fringe benefit tax component for the provision of those telephones. Do honourable senators know what the Commissioner of Taxation suggested? He suggested that to overcome the problem the company install a separate telephone, with a separate telephone number, in each employee's house. Not only is this going to add to costs but it will not even solve the problem because we all know that if the wife wants to ring up the mother-in-law in Melbourne she will not use the private phone, she will use the company phone. That advice is farcical. What has really happened is that the Labor Government's fringe benefits tax has legitimised the payment of perks to people on higher incomes but the real sufferers are those on the bottom and middle income levels. Senator Cooney's mates who are earning over $40,000 will get more and more fringe benefits because it will be cheaper for a company to give them fringe benefits than to pay them an additional amount. What is the Government going to do to these poor little blokes? The tax is becoming a hidden cost on the employees as well as the employers. The employees are the very ones who are supposed to benefit, to get away from this fringe benefits tax, but it is a tax on employees. Employers, of course, will pass on their costs in the form of higher wages. According to the Australian Bureau of Statistics about 58 per cent of lower and middle income earners get some sort of fringe benefit. It may not be much, but it all adds to the cost. A local charity, a community organisation, in Canberra will have to pay $2,000 fringe benefits tax. But what are the bosses doing? They are reducing the number of salary increases and bonuses. They have taken away these benefits and so the sufferers are those lower and middle income earners, not those on higher salaries because they will get increased perks. Those on lower incomes will have the tax absorbed within their industry. Apart from that, we have also had instances where the employer has passed the tab back to the employee. The tax on company cars is another example of where the ordinary person on average income will be far worse off. Although there is an accounting classification for the fringe benefits tax the Public Service has effectively been quarantined from it. There is no cashing out in the public sector as there is in the private sector. I believe this is an abhorrent tax and therefore I stand with my Leader in saying that the Labor Party's fringe benefits tax has to be amended in the immediate future but that when we come to power it will certainly be abolished. Senator SHORT(Victoria)(12.25) —The package of Bills we are debating at the moment, the Income Tax Rates Bill 1986, the Income Tax Bill 1986 and the Taxation Laws (Miscellaneous Provisions) Bill 1986, along with the change to the Medicare legislation are the principal legislative proposals giving effect to the taxation measures announced by the Government in the Budget in August. The first thing I think we ought to be saying about these Bills is that they should never have been introduced. Had the Government pursued responsible, competent economic policies, these tax changes and tax increases would not have been necessary. They are being introduced simply as a product of a spendthrift wanton socialist Government that is driving Australia towards bankruptcy. This Government is the largest taxing and the highest taxing government that Australia has had since Federation. This year taxation receipts will account for 25.5 per cent of gross domestic product. That is a record level of taxation. Why is this taxation being levied? It is being levied for one reason only, and that is because the Australian Labor Party Government is unable to restrain its ever inherent need for further funds for its spending sprees. That case can be made right across the board. Look at the advertising campaigns, the media junkets, the paying off of friends in the Australian Council of Trade Unions movement, the grants for various pursuits, and the administrative and bureaucratic bungles that are going on everywhere throughout Labor's activities. I am absolutely staggered to see in today's Press the admission by the Treasurer (Mr Keating) that the Government is in fact considering a high flying national advertising campaign to sell its tax reform package, a campaign which is estimated to cost $2m. Mr Acting Deputy President, that is $2m of your money, my money and the money of every Australian which we pay in taxes. It is not coming out of the coffers of the Labor Party, it is coming out of the pockets of Australian taxpayers. Even the lead-up to this announcement yesterday by the Treasurer has been fraught with the confusion and misinformation that has become the hallmark of this Government. Only a few days ago the Minister responsible for government advertising, the Minister for Sport, Recreation and Tourism, Mr John Brown, told Parliament that the suggestion of such an advertising campaign was: `A flight of fantasy'. No sooner had he said that than he was contradicted by the then Acting Treasurer, the Minister for Immigration and Ethnic Affairs, Mr Hurford, who said that the Government was considering a campaign although planning was in the `very early stages'. Yet yesterday Mr Keating admitted that three advertising agencies had already been approached. He tried to defend this campaign and this decision by saying that it was within `established procedures'. That is nonsense. No government in the history of Australia has spent so much of other people's money in trying to promote itself in terms of the campaigns that it has been pursuing. They are essentially political campaigns that have nothing to do with educating Australians about the activities of government. Indeed the reports in relation to this latest campaign show quite clearly that in the main it is not going to advise people about the forthcoming December tax cuts. It is understood that the main thrust will be the unpopular fringe benefits tax. A great deal has been said about the fringe benefits tax in both chambers and on both sides of the Parliament for a considerable time. I do not propose to go over the detail of that today but I would like to bring to the attention of the Senate a statement very much in support of what we, on this side of politics, have been saying about this anti-business, anti-incentive, anti-job fringe benefits tax that is being perpetrated on the Australian community. I quote from the latest publication of the Federated Clerks Union of Australia-hardly a radical left wing union; it is a very responsible union. The August issue of The Clerk, its newsletter, has an article which is headed `Fringe taxes cost jobs'. It is such a significant statement that I will read it to the Senate. It states: Jobs of workers in their thousands are threatened by the Fringe Benefits Tax in weakening investment and in pushing up costs which trigger buyer resistance to higher prices. It is precisely the thing that this coalition has been saying ever since the fringe benefits tax was first mooted. The article goes on: Taxes and charges are a cause of a fall of 170,000 car sales this year, a loss of almost $2 billion in retail turnover. More than 80,000 people are employed by car and component manufacturers, plus another 100,000 in automotive distribution and retailing. An estimated 250,000 swell their ranks in related industries that supply and service the motor industry. The Fringe Benefits Tax bites everywhere in primary, tertiary and manufacturing industries, striking at the employment security of blue collar and white collar workers alike. Here comes the significant point although all those other points are very pertinent as well. The article goes on: At its August meeting the ACTU Executive said: The Fringe Benefits Tax is wider and greater than anticipated. In some ways the tax is inconsistent with assurances that were given to unions by the Federal Government. The ACTU will seek to resolve the difficulties confronting workers in retail, building and banking industries and other similar problems brought about by the Fringe Benefits Tax. No better confirmation has been given anywhere in anything I have read in the last two or three months about the fringe benefits tax and the inequities and the cost of that in terms of investment and employment in Australia than that article that appears in The Clerk newsletter. Senator Walsh —It is the sort of nonsense one reads somewhere or other about every tax. Senator SHORT —The Minister may say that, but I am sure that the Federated Clerks Union, all the other unions, and members of the executive of the Australian Council of Trade Unions will be very pleased to note his comments. Senator Lewis —Fancy imposing those taxes while choking off demand with a tight monetary policy. Senator SHORT —That is right. Senator Walsh —You are a lackey of the ACTU. Senator SHORT —At least it appears, I say to the Minister, that the Australian people are waking up to which party in Australian politics is the party which is concerned with the whole community; the low income earners, the medium income earners, as well as those who did not earn income at all. It has taken Australians a little while to wake up to the fact that the Government is beholden to vested interests in this community that has led to policies of lack of restraint, that have put this country very rapidly on the road to bankruptcy. The Minister knows that as well as I do. He has not been able to hold the line in his portfolio and in the job he has been given by his Government. During the last election campaign the Prime Minister (Mr Hawke) travelled the length and breadth of this country touting his much vaunted trilogy promises. One fundamental element of that trilogy was that there would be no increase in the overall level of taxation as a proportion of gross domestic product, either over the life time of the Parliament or during the first year the Budget was brought down under a re-elected Hawke Government. The tax leg of the trilogy has been broken in each of the two Budgets that have been brought down since the election in 1984. There have been increases in the percentage of tax collected as a proportion of GDP in each of these two years, despite the unequivocal commitment that the Prime Minister gave the nation in trying to buy votes at the time of that election. In 1984-85, the percentage of tax to GDP was 25 per cent. That was the figure that was not going to be exceeded, yet in the first Budget alone it went to 25.2 per cent in the actual out turn and that became apparent only through careful reading of the Budget Papers. The Government did not even have the courage to announce that it had broken its trilogy promise. This year the figure is forecast to be 25.5 per cent, and that is a figure based on a very reliable and-to coin a word of which Senator Walsh is very prone-shonky forecast for 1986-87. That forecast will not be fulfilled. When the forecast is not fulfilled it will lead to an even larger breaking of the trilogy, the unequivocal promises so-called, than is already admitted. In 1986-87 Mr Keating will break the trilogy tax commitment. He will break it by not far short of $1.5 billion collected in a raft of new tax collections to try to go some way to meeting that great yawning chasm between government spending and government revenue. That has nothing to do with the economic growth of this country. Those tax increases are cold, deliberate decisions taken of necessity because of this Government's inability to act competently and restrainedly in terms of its expenditure commitments. Not only that, but the Prime Minister himself has already laid the ground work for another dishonouring of the trilogy next financial year, 1987-88. As recently as 27 August he said: The decision regarding the tax share of GDP in the 1987-88 Budget will be taken in the light of circumstances at that time. Nothing could be more clear-the Prime Minister is trying to give himself an out in terms of yet a further breaking of his commitment next year. That is not the end of the story by any means. The state of the economy is much worse than those comments portray. The promised September tax cuts have been deferred to December this year. The Treasurer has again broken his promise. He has done it before and he will do it again; there is no guarantee that he will not. Even if these tax cuts are granted the average and marginal taxation paid by Australians, whether they be single or a supporting spouse with two children, will be higher than when this Government came to power in March 1983. The average tax rate in March 1983 was less than 23 per cent. The marginal rate was 30 per cent. In both cases, even after the second stage of the delivery of the promised tax cuts, those rates will then be 24.5 per cent and 40 per cent. A married couple with one breadwinner and two children paid $52.12 a week income tax when the coalition left office in 1983. In December 1986 after the first of the Government's much vaunted tax cuts that same family will be paying $93.43 a week, and after July 1987, that is after the second stage of the tax cuts, the tax paid will be even higher-it will be $94.50 a week. That compares with $52.12 a week that was the tax applying when the Fraser Government lost office in 1983. In other words, there will be a massive increase-almost a doubling of the $42.38 a week-in tax for the average taxpaying family over the period of the Labor Government's administration. To call the tax changes that this Government is proposing for December this year-three months late-and for the middle of next year `tax cuts' in any real sense is an absolute and total hoax and fraud on the Australian community. Thank heaven, the Australian community has woken up to that. I have a table giving some greater details on those figures that I have just provided. I seek leave to have the table incorporated in Hansard. Leave granted. The table read as follows- TAX PAYABLE ON AVERAGE WEEKLY EARNINGS, TAXPAYER WITH DEPENDANT SPOUSE AND TWO DEPENDANT CHILDREN $ per week March 1983 June 1986 December 1986 July 1987 Income (a)... 370.30 465.90 479.00 493.90 Gross Tax (b)... 84.65 120.46 119.97 120.86 Spouse Rebate... 19.75 19.75 19.75 19.75 Medicare Levy... . . 4.66 5.99 6.17 Net Tax (c)... 64.90 105.37 106.21 107.28 Family Allowance... 12.78 12.78 12.78 12.78 Effective Net Tax (d)... 52.12 92.59 93.43 94.50 Effective Net Tax as % of Income-%... 14.08 19.87 19.51 19.13 (a) Average Weekly Earnings for full-time adult male employees. December 1986 and July 1987 assumed to be 3.0% and 6.0% increase on June 1986 (1986-87 Budget forecast). (b) Based on following tax rates: March 1983, November 1982 rates; June 1986, 1985-86 rates; December 1986, December 1986 rates; July 1987, July 1987 rates. (c) Gross tax less Spouse Rebate plus Medicare Levy. (d) Net tax less Family Allowance. Senator SHORT —No fewer than 14 new tax initiatives which have been taken have resulted in increases in tax levels by Labor since it came to office. Those tax increases have been fraught with anomalies and loaded on to the productive sector of the community and, through that, have had wide-ranging negative application to each and every person in Australia. We have seen the sales tax on flavoured milk and fruit juices and increased wholesale taxes, and petrol excise over the last 18 months alone has increased by well over 100 per cent. We have seen the introduction of the fringe benefits tax, the capital gains tax, the entertainment tax, the lump sum superannuation tax, a whole range of new wholesale taxes-- Senator Crichton-Browne —And soon the gold tax. Senator SHORT —And soon, perhaps, the gold tax, which we-including Senator Crichton-Browne, of course-are totally committed to rejecting if it is brought in by Labor. We have seen the automatic biennial indexation of excise rates, the abolition of concessional expenditure rebates, a wine tax, an excise tax on intermediate and new oil and, finally, a bureaucratic substantiation of employment expenses. It is small wonder that Australians are sensitive to the tax issue-it is the most sensitive political issue in Australia today, as the latest survey results indicate- because they have been deluged by an orgy of taxation by an avaricious government unable to control its housekeeping. The latest Roy Morgan gallup poll shows that Australians rank taxation reductions as the most important issue; 36.3 per cent of Australians rank it as No. 1. That is by far the most important issue. One of the other Bills that we are debating is the Medicare Levy Bill, whereby the Medicare levy will rise from one per cent to 1 1/4 per cent of taxable income. That increase in levy leaves little room for doubt that Labor is unable to deliver effective health care at a reasonable cost. It is yet another example of a broken promise. In the 1984 policy speech the Prime Minister said: And now I give this undertaking-that for the term of our next government the Medicare levy will not be increased. As recently as February this year the Prime Minister said: I affirm that the Government has no plans to change the Medicare arrangements. The following month, in March, Dr Blewett said: Well the Prime Minister has made it quite clear at the election and in a recent statement that there's no consideration of changing the Medicare levy. Yet five months later, in August, the Budget brought down a 25 per cent increase in the Medicare levy. When Medicare was introduced on 1 February 1984 the one per cent levy on taxable income provided everyone with three health insurance benefits: First, Medicare benefits of at least 85 per cent of schedule fees; secondly, free treatment in a public hospital; and, thirdly, subsidies of up to $40 a day in a private hospital. On 1 October 1986, after a 25 per cent increase in that levy, we now get for that higher levy a reduction in benefits. Everyone continues to receive medical benefits, but the benefits have been reduced. Fees in public hospitals will increase, as will the gap between Medicare benefits and schedule fees for hospital patients. The old gap was up to $10 per service. The new gap is up to $20 per service. People with private health insurance must now pay in a public or repatriation hospital. No one receives a private hospital subsidy. The transfer of costs from government to the private sector in this health area now amounts to $450m a year. Debate interrupted. Sitting suspended from 12.45 to 2 p.m. Senator BUTTON(Victoria-Leader of the Government in the Senate) —by leave-I inform the Senate that Senators Grimes and Ryan will both be absent from the chamber for Question Time today. Any questions which would normally be directed to Senator Grimes should be directed to Senator Gietzelt. Questions for Senator Ryan should be addressed to me. Senator CHANEY(Western Australia-Leader of the Opposition) —by leave-Mr President-- Senator Walsh —Have another whinge. Senator CHANEY —The foul-mouthed Minister for Finance is seeking to intervene in the debate, Mr President. I suggest that you ask him to shut up. The PRESIDENT —Order! The Leader of the Opposition has been given leave to make a statement. Senator Walsh —Come on, Fred. The PRESIDENT —Order, Senator Walsh! Senator CHANEY —The Government establishes when the Parliament will sit. The Opposition has at all times co-operated with the Government in its arrangements. The Leader of the Government in the Senate (Senator Button) has been absent from the Senate in the last week or so from Question Time and on other occasions. We are now told, without any notice at all, that two Government Ministers are not available for Question Time. It is fairly typical of the total lack of courtesy that is shown so often in this place. I suggest that it is time that the Government showed some regard for its responsibilities. It is in no way the responsibility of the Opposition as to when this place sits. As far as I am concerned, it is not good enough. I ask the Government not to have the Parliament sitting if its Ministers are unable to attend. I note that we were not given the courtesy of any explanation. There have been occasions when Ministers such as Senator Gareth Evans have come to the Opposition and explained that matters which I think have properly been the concern of a Minister have required them to be absent; I acknowledge that. But on occasions such as this, when no explanation whatsoever is given, it is quite unsatisfactory. The Leader of the Government owes us some explanation. Senator MASON —My question is directed to the Minister representing the Treasurer. Following the successful passage of legislation discounting Service and Public Service superannuation in both Houses recently, I ask the Minister: Does a Government working paper exist examining the desirability of discounting all or any pensions so they are no longer fully adjusted to increases in the cost of living? Whatever the answer, will the Minister give a positive undertaking that the Government will not reduce age or disability pensions through use of this mechanism? Senator WALSH —There was no Cabinet minute on that subject per se, although I recall that information was put before Cabinet on a wide variety of expenditure savings options and the costing of those options. I think there was something about what the effect of a pension discount would be. It is something anybody could work out from the previous year's Budget Papers with reasonable accuracy, anyway. So there probably is a bit of paper, but it will not be made available. As to the second part of the question, which I regard as being almost frivolous, the Government did not discount age and general pensions. Senator MASON —Mr President, I ask a supplementary question. My question was not whether the Government discounted pensions. I asked the Minister to give a positive undertaking that it will not reduce age and disability pensions through the use of that mechanism. Senator WALSH —I can understand why my colleagues do not bother to come to Question Time, with this sort of nonsense being served up to us. It speaks for itself. The Government decided not to do it. Senator COLEMAN —My question is directed to the Minister for Veterans' Affairs. I refer to letters from the Private Hospitals and Nursing Homes Association of Australia which are being circulated to war widows who are residents of nursing homes and which are causing considerable concern. I draw the attention of the Minister to words used in those letters, such as that nursing home patients `should not necessarily expect that there will soon be a benefits increase' from the Commonwealth to cover those fee increases. The letters urge them to write to their local member of parliament or to the Minister for Community Services. I ask the Minister: Do those war widows have cause for concern in this regard, or are they being used in a scare campaign by the owners of private nursing homes? Senator GIETZELT —I recall Senator Childs asking Senator Grimes a somewhat similar question relating to aged citizens in nursing homes. I have received a number of complaints from members of parliament and through my constituency office regarding the extension of the issue previously raised to war widows. Largely, the letters have come from the Private Hospitals and Nursing Homes Association of Australia. They have caused a great deal of distress. In respect to the specific question that Senator Coleman raises, war widows in nursing homes have been caused totally unnecessary distress by these letters. My Department guarantees to meet all approved increases in fees for war widows who are resident in nursing homes at the time of the increases as well as for a number of other categories of repatriation beneficiaries. I have no doubt, therefore, that, having been given that commitment by the Department, the private nursing homes are using war widows in a very cynical campaign to try to put pressure on the Federal Government to approve further nursing home fee increases. My view is reinforced by the fact that for the first time some nursing homes-they should be indicted for it-have started to bill war widows directly for their fees rather than billing my Department, the latter being a practice that has been in operation for many years, even though the nursing homes know perfectly well that the Department will meet their account. Persons associated with these dealings are unscrupulous. They are clearly attempting to manipulate a vulnerable group for political purposes. Senator CHANEY —I ask the Leader of the Government in the Senate: Will he explain to the Senate why two Ministers are absent from Question Time? Can he tell us why we were given neither the courtesy of notice nor the courtesy of an explanation? Senator BUTTON —In relation to the second part of the question, I do not know. I am endeavouring to find out. In relation to the first part of the question, Senator Ryan is addressing a conference in Adelaide today, and I am not clear about Senator Grimes's position at the moment. Senator COLSTON —I direct a question to the Minister representing the Treasurer and the Minister for Primary Industry. Has the Minister's attention been drawn to an article in this morning's Australian in which the Queensland Premier is reported as announcing that a National Party government of that State would offer loans of up to $50,000 at 4 per cent interest to farmers to help them pay the fringe benefits tax? Would this offer be of any value to most farmers? Senator WALSH —The answer to the second part of the question is very simple: No; it will not be of any value whatsoever to the overwhelming majority of farmers, because, as the Commissioner of Taxation stated publicly two days ago, 85 per cent of farmers will not be affected by the fringe benefits tax-which tells us something about the priorities of the National Farmers Federation and, in particular, who Ian McLachlan is really concerned about. Ian McLachlan is really concerned about the directors of Elders IXL Ltd-himself, the Liberal Party Treasurer, and a few other people like that. But he is enlisting-- Senator Chaney —Mr President, I take a point of order. We are not to have the courtesy of the presence of the Minister-- Senator WALSH —Oh, you wimp! The PRESIDENT —Order! Senator Chaney —Mr President, I am pleased to be called a wimp by Senator Walsh. So disgusting is his performance in this place that the more abuse he heaps on one, the more respectable one's position becomes. However, as we are not to have the courtesy of Ministers being present to answer questions, could those who do deign to attend at least be kept to answering questions? Could the rule of relevance be observed? Could you also hold the Minister to the standing order about not debating questions? The PRESIDENT —Order! The Leader of the Opposition would well know that I am not in a position to direct a Minister as to any way in which he answers a question, except so far as standing order 100 is concerned, which decrees that a Minister shall not debate any issue which is the subject of a question. I once more draw Senator Walsh's attention to that standing order and ask him to relate his remarks to the question and not to engage in debate on the subject matter. Senator WALSH —Certainly, Mr President. The plain fact is that the fringe benefits tax will have no effect upon 85 per cent of farmers. What the Queensland Premier has promised to do is in fact a stunt. It is just another excuse for handing out largesse to National Party apparatchiks-taxpayers' money at 4 per cent interest, funds provided by the taxpayer, lent out by the Queensland Government-on the pretence that it will help farmers pay the fringe benefits tax when 85 per cent of farmers are not affected by the fringe benefits tax at all. According to the report, the proposed loans are to be administered through the Queensland Industry Development Corporation. I do not know where that institution gets its funds from but I will be doing everything I possibly can to ensure that Queensland no longer siphons off any Federal money that is designed for other purposes into that particular slush fund, as it has done in many other cases. Senator Boswell —I raise a point of order. That slush fund, as Senator Walsh refers to it, is clearly a department or a corporation of the Queensland Government. It is the Queensland Industry Development Corporation where the money comes from. The PRESIDENT —Order! There is no point of order. Senator TEAGUE —My question is directed to the Minister representing the Minister for Foreign Affairs. I refer to the Minister's answer in Question Time yesterday that the Government has no evidence that the Soviet Union has deployed weapons systems in Vietnam which directly endanger Australia. I ask the Minister: Does this not contradict the answers given by the Minister for Defence to the honourable member for Hawker to questions on notice Nos 171 and 172 in May 1985? Is it not the case that the situation outlined in those questions and answers is still the same in terms of Soviet operations? Could he remind the Senate of those details? Is it not, therefore, the case that Soviet forces operating out of Vietnam threaten potentially both our sea lines of communication and our territory, in the latter case through refuelled bombers or nuclear-weapon carrying submarines deployed from Cam Ranh Bay in either the Pacific or Indian Oceans? Senator GARETH EVANS —I take it that Senator Teague is referring to some answers to questions on notice in which Mr Beazley identified the understood Soviet naval and air presence at Cam Ranh Bay in Vietnam. It is undoubtedly the case that there is a substantial store of armaments and weaponry there located. The argument simply boils down to one essentially about semantics-whether or not one regards the capability at Cam Ranh Bay as being of a character that directly endangers Australia, to use the language that I employed yesterday. Mr Beazley is certainly of the view that it cannot be so described. I am in the process of seeking a more comprehensive response from the Minister in order that I can perhaps argue the case in the terms that the honourable senator would prefer, but there is no argument at all about the stationing of quite a substantial arsenal at Cam Ranh Bay. The question is about the strategic significance of that so far as Australia is directly concerned. Senator TEAGUE —I have a supplementary question. The Minister referred to semantics, but I ask whether it is the case that the Minister misled the Senate yesterday in referring to the absence of such weapons systems in Vietnam. Is the statement of the Minister for Defence incorrect? Senator GARETH EVANS —Senator Teague is getting over-excited, rather like Senator Chaney. It must be these Friday sittings. The reality is that what I said yesterday is perfectly straightforward. What I said was that the Government has no evidence that the Soviet Union has deployed weapons systems in Vietnam which directly endanger Australia. Senator CHILDS —My question is directed to the Minister for Resources and Energy. Is it true, as claimed in a recent Press report, that petrol prices in Sydney have increased by 8c per litre as a result of the Government's import parity pricing policy? Senator GARETH EVANS —No, it is not true. In an article in the Daily Telegraph yesterday-indeed, I have heard subsequent radio reports-the increase has been put at as high as 11c per litre. The latest adjustment to import parity prices on 1 October in fact resulted in an increase in the wholesale price of petrol of only 0.17c per litre. That was actually less than the 0.25c per litre which I had indicated was likely to occur at the time of that parity price increase. That followed because the Prices Surveillance Authority used a different exchange rate. In terms of the increase in petrol prices in Sydney that is attributable to the import parity pricing policy, obviously those reports are wildly astray. To the extent that the increase has occurred in various locations around Sydney-in fact, I gather the greater metropolitan area-the cause of it is that the oil companies, once again, are changing their marketing practices and discontinuing the price support which had enabled very extensive discounting in the Sydney metropolitan area. This phenomenon of discount wars breaking out, keeping the price down, then retreating and there being substantial price increases, has been a phenomenon which has been with us for a long time in most metropolitan areas, particularly Sydney and Adelaide, and has nothing whatsoever to do with the dynamics of the import parity pricing system. I should point out that the wholesale price of petrol-in fact, if one takes the national average-has fallen by about 6 per cent in real terms over the last 12 months as a result of the direct flow on of changes in the world oil price scene into the Australian domestic market as a result of that import parity pricing system. One could refer to comparative price increases in petrol over the 10 years of the Liberal Government as compared with our own. Under the Liberal Government, petrol prices rose by 27.5c per litre, from 15.7c per litre to 43.2c per litre over the period that it was in office; whereas prices have risen only from 43.2c per litre to 56.9c per litre, a rise of 13.7c per litre, during our period of office. Honourable senators interjecting- Senator GARETH EVANS —These comparisons, although one is tempted to make them, make no particular sense by virtue of the continued operation of the import parity pricing system under both governments. I cheerfully acknowledge the force of the points that have been made opposite by way of interjection. I am making the point that comparisons of that kind overlook the reality that because, under both governments, our price structure is tied to the world market, there is simply no point in attributing the variations that do occur in market prices to any action that may be taken by government. A final point that I think is worth making is that it is quite hypocritical of the Daily Telegraph to point to a petrol price increase of 390 per cent since 1974. This paper is currently sold at 40c. In early 1974 the same paper sold for only 8c, which represents a price increase of 400 per cent over that same period. Senator MESSNER —My question is addressed to the Minister representing the Treasurer. In light of the remarks by the Victorian Premier in Melbourne last night supporting the Australian Council of Trade Unions' proposal to limit foreign investment of superannuation funds and suggesting that the Victorian Government will consider ways to achieve this end, does the Minister recall saying in Estimates Committee C on 16 September, in reference to overseas investment by the Superannuation Fund Investment Trust: `What the Trust does is no business of governments'? Can the Minister clear up what is obviously a conflict of ideas between himself, the ACTU and the Cain Government? Will the Minister advise the Senate what action the Commonwealth Government intends to take in regard to the ACTU's proposals? Senator WALSH —In response to the last part of the question, I will see what the Treasurer has to say as to whether he intends to put any submissions to Cabinet in response to Mr Cain, the Australian Council of Trade Unions or anyone else. My words quoted from the Estimates Committee Hansard of 16 September have been-I do not say that it has been done deliberately-taken out of context. They were said in the context that the Government does not direct the Superannuation Fund Investment Trust just because it is an organisation set up by statute and it invests the contributions of Commonwealth employees. It is expected to operate as a commercial organisation but of course all superannuation funds have to operate under more general guidelines or legislation and SFIT, like the fully private funds, has a framework imposed by the Government within which it must operate. I am not forecasting that this would happen or is likely to happen, but should the Government decide to apply any restrictions to superannuation funds in the way in which they can invest their money or how much of it they can invest off-shore, I would expect that type of rule to apply to the SFIT and to the private funds alike. Senator CROWLEY —My question is to the Minister representing the Attorney-General. It was recently announced by the South Australian Attorney-General that legislation to grant Family Court jurisdiction in cases involving the maintenance and custody of so-called illegitimate children will be introduced in South Australia, New South Wales, Victoria and Tasmania. Currently such cases are heard in State courts whilst the Family Court deals with matters involving legitimate children, creating all sorts of confusion and lack of rationalisation of services. Can the Minister say when the Family Court will assume this responsibility and what provisions will be made for Queensland and Western Australia, States which have not yet conferred on the Family Court jurisdiction to deal with all matters of maintenance, guardianship, custody and access to children? Senator GARETH EVANS —It is the case that Victoria and South Australia have introduced Bills into their respective State Parliaments to refer to the Commonwealth Parliament legislative powers in relation to the custody, guardianship, maintenance, access and child bearing expenses of all children subject to a proviso to preserve the operation of State child welfare laws. Those Bills are expected to be passed this year. The timetable for the implementation of the powers thus referred remains to be sorted out but I for one hope that it will be done as soon as possible. New South Wales and Tasmania are also to introduce similar Bills later this year. The Commonwealth will amend the Family Law Act to confer the additional jurisdiction on the Family Court and courts exercising jurisdiction under that Act according to the timetable yet to be determined, as I said. The big problem remains, as always, Queensland. The Queensland Attorney-General has indicated that the Queensland Government simply does not intend to refer these powers. He sought approval for the establishment of a State family court in Queensland as an alternative. The Commonwealth Attorney-General has rejected-as I did before him, and I think maybe even Senator Durack did before that-this alternative proposal for a whole variety of practical and other reasons. We will continue to negotiate for a reference of powers. In the meantime the very unsatisfactory jurisdictional problems that can arise through the operation of dual systems will continue to operate in respect of ex-nuptial children of that State. As Western Australia has its own State Family Court, for reasons going back some time in history and which continue to make reasonable sense, it presently exercises jurisdiction in the matters that would be given to the Commonwealth under the reference of powers. So the need for a reference of powers from Western Australia extends only to the provision of uniformity of laws on custody, guardianship and maintenance. I mention finally that in both Western Australia and Queensland the existing arrangements for the hearing of custody, guardianship and maintenance cases for ex-nuptial children will continue. Senator PETER BAUME —I ask the Minister representing the Minister for Aviation to ascertain as a matter of urgency whether the following sequence of events which could amount to a serious misleading of a Senate Estimates Committee by the Department of Aviation took place: Did an officer of the Department of Aviation take on notice questions for Qantas Airways Ltd concerning health warnings on cigarette packets sold on Qantas aircraft? Is it a fact that no answers to these questions were forwarded to the Committee when answers to questions taken on notice by the Department of Aviation were provided? Was a letter from Mr J. F. Moffatt, on behalf of the Department of Aviation, received by the Committee, which stated: `A response to those questions will be forwarded as soon as it becomes available.'? Has the Committee taken Qantas to task in its report tabled in the Senate this morning for not providing answers to these questions in satisfactory time? Is it a fact that this morning Mr Kavanagh, an officer of the Department of Aviation, informed the Secretary of the Estimates Committee orally that the answers to the questions had been provided to Mr Potter of the Department of Aviation about a week ago? I ask that these matters be determined urgently, Mr President, because if they are as suggested there may have been a breach of the privilege of the Senate which I may have to raise for you to determine. Senator GIETZELT —I recall Senator Peter Baume asking at a meeting of Senate Estimates Committee F for certain information about the practice of Qantas aircraft on overseas flights selling cigarettes on the packets of which the health warnings required for the sale of cigarettes in Australia did not appear. There was concern about the legality of the action Qantas had taken in this respect. This matter was referred by the Department of Aviation to the Attorney-General for interpretation as to whether there was any breach of Commonwealth law. Following my request to Qantas that it expedite the response to the matters raised by Senator Peter Baume, Qantas has now advised me that as cigarettes sold on board its aircraft are for export there is no requirement for cigarette manufacturers to include a health warning on the packets. That is the advice of Qantas to the Government. Notwithstanding that advice, Qantas has arranged with the cigarette manufacturers with which the company deals to provide Qantas with packets that carry a health warning. The company has advised that the health warnings will appear on the packets within three months, because of the time required for modification of the printing format and the acquittal of existing stocks. The Department of Aviation has consulted the Department of Health on this general question, which I gather then sought a legal opinion from the Attorney-General relating to international carriers. The Department of Health has now advised that the situation has been examined against the background of rotational health warnings on tobacco product packages. At this point I doubt that there has been a breach of privilege as suggested by Senator Baume. However, if there is a problem in that area I will examine it and draw it to the attention of the appropriate authorities. Senator PETER BAUME —Mr President, I ask a supplementary question. I am very grateful to the Minister for the information he has provided but it did not answer my question. My question was, quite simply: Is it a fact that the Department, in a letter forwarded to Estimates Committee F, said that it had no answers to certain questions and is it a fact that the Department today has advised orally that it had held those answers for a week? That is the question, Mr President. I am perfectly prepared to table the letter received by Estimates Committee F. The PRESIDENT —Order! The honourable senator has asked his supplementary question. Senator GIETZELT —I think I indicated that if Senator Peter Baume made that document available I would be prepared to examine it to see whether there was any breach of privilege. If there is, I will take the appropriate steps. I do not have a copy of it, although I am aware of some of its contents. I would certainly seek information from the Department to see whether there has been any intent on the part of any departmental officer to withhold information to the Senate. Senator BLACK —My question is directed to the Minister for Finance. I refer to Press reports that the Premier of Queensland has replied to correspondence regarding the disposition of $3m which had been placed as part of the Commonwealth's commitment to Expo 88. What is the substance of the Queensland Premier's answer? In addition, has the Queensland Premier yet replied to correspondence of 18 and 26 September regarding the Queensland Government's use of Commonwealth funds under the natural disaster relief arrangements? If so, what is the substance of that reply or replies? Senator WALSH —The letter which I sent to the Queensland Premier on 14 October, regarding his allegation that the Commonwealth had made no contribution to Expo 88, was answered the next day, which demonstrates that where the Queensland Government has nothing to hide, it is quite capable of answering correspondence very promptly. I am relieved that the Premier has advised me that the $3m is still being held in the trust account where it is supposed to be and is still accruing interest. It has not been siphoned off for some improper use, as has been happening recently in the case of Commonwealth funds paid to Queensland. In the letter he also seized the chance to do a bit of lobbying for additional Commonwealth funding for Expo. Of course, it has always been the case that some additional Commonwealth money would be available. Indeed, a very substantial additional amount would be available. In addition, of course-something the Premier's letter does not address-the Commonwealth Government has paid the operational expenses of the chief organiser of Expo, Mr Justice Williams, who, I understand, is known as Neddy Williams and is a close friend of the Premier. So the Premier ought to be aware of that, too. Senator Colston —He flies all over the world. Senator WALSH —Is he in the club? I am told that he flies all over the world. The Commonwealth will provide a number of other services when the Expo is held. In response to the second part of Senator Black's question-that is, what replies have I had to my letters to the Premier of 18 and 26 September regarding Queensland Government administration, or, more accurately, maladministration, of Commonwealth funded national disaster relief arrangements-I also received what purported to be a reply to those letters yesterday. I should say, however, that there was nothing of substance in that letter. It did not address the specific questions that I asked in my letters of 18 and 26 September-that is, whether funds had been used in accordance with the guidelines. He also failed to give any indication of whether any investigation had been carried out into apparent fraudulent practices in relation to NDRA applications. I certainly do not accept statements such as this: In regard to the specific matter raised in your letter of 18 September 1986 this has been amply and completely discussed in the public arena. There is nothing to add. The matter referred to, of course, in the letter of 18 September was the $145,000 loan that was provided to the National Party employee and failed Senate candidate, Mr Michael Behan, against the advice and recommendation of the Agricultural Bank and the Rural Reconstruction Board. Senator Robert Ray —Did someone try to knock you off, Ron? Senator WALSH —I think Senator Boswell has told us that he did not get one of those, Senator. It is a bit of a surprise. I think he has told us previously that he did not get one. He must be about the only National Party member in Queensland-- The PRESIDENT —Order! I ask Senator Walsh to come to the question or to resume his seat. Senator WALSH —Certainly, Mr President. The Queensland Premier, in that reply, has not addressed the issues that I raised, nor has he provided the specific information which I sought, which could readily be provided if the Government had nothing to hide. Finally, I certainly do not intend to let the matter drop. Senator COLLARD —My question is addressed to the Minister representing the Minister for Arts, Heritage and Environment. In spite of the fact that the protection of movable cultural heritage legislation was passed in the Senate on 13 May 1986, it has not been proclaimed. It has come to my attention that items of unique cultural significance are still being exported, much to the consternation of the Opposition, museum directors and other concerned Australians. In view of this, when does the Minister anticipate that the legislation will be proclaimed so that this drain on our cultural heritage will be stopped-the very thing that the legislation was meant to do? Senator BUTTON —I will try to obtain by the end of Question Time an answer to that question in respect of the likely proclamation date. Senator FOREMAN —Was the attention of the Minister for Finance drawn to an article in the Age of Wednesday, 15 October, entitled `Tax chief opposes a return to old law on perks'? In that article the Commissioner of Taxation, Trevor Boucher, was quoted as saying that those who advocated a return to the former law ignored or forgot history. Mr Boucher also stated that employer collection of the fringe benefits tax was `in fair company with pay as you earn concepts'. Does the Minister agree that a return to the old system of untaxed perks, as the Opposition appears to want, would cost the rest of the taxpaying community hundreds of millions of dollars? Senator WALSH —I was asked whether I agreed that attempts to tax fringe benefits under section 26 (e) of the Income Tax Assessment Act would lead to the loss of hundreds of millions of dollars. I do not agree with that, because it would lead to the loss of billions of dollars of revenue. It would have to be measured in billions of dollars. If the fringe benefits tax was to be repealed, as the Opposition says it would be if it came into government, the leakage of revenue would be measured in billions, not hundreds of millions, of dollars. The statement that Mr Boucher made-I think it was made three days ago-of course, scuttled whatever credibility the discredited Leader of the Opposition may previously had had, or any credibility that the Opposition substitute for a tax policy may previously have had. The Commissioner of Taxation has stated unequivocally that fringe benefits cannot be taxed effectively under section 26 (e). That was the same judgment that the Government made, of course, and the reason why the Government proceeded with its fringe benefits tax legislation. If, in addition, this Government's fringe benefits tax legislation were to be repealed, it would then become known that there was no tax to be levied on fringe benefits. The floodgates would open and billions of dollars of revenue would be lost from people who could arrange their affairs appropriately. Of course, they would be the sort of people that the Liberal Party represents. They would not be ordinary Australians. Ordinary Australians would be forced to pay more tax in order to plug the gaping hole in the revenue that the actions of a Liberal government would open up. Mr Howard does not seem to have much luck with tax commissioners, past or present. Mr O'Reilly effectively dumped on him, having regard to the 28 desperate entreaties he wrote to Mr Howard, begging him to stop the bottom of the harbour tax racket. Now the present Commissioner is saying that the substitute for a tax policy which the Opposition is putting up is unworkable. The kindest interpretation one can put on the Opposition's policy particularly that of its Leader, is it is incompetent. The least kind interpretation is that he knows exactly what he is doing-that is, he will facilitate tax evasion if he becomes Prime Minister, just as he did as Treasurer. Senator VIGOR —My question is addressed to the Minister for Industry, Technology and Commerce. Why are parliamentarians dependent for information on newspaper articles, such as that published in last Saturday's Sydney Morning Herald, to learn of the Minister's response to an Australian Academy of Technological Sciences study requested by the Minister for Science on a space policy for Australia? Why was the Madigan report not tabled in Parliament, and why is not a copy readily available from the Parliamentary Library, except on inter-library loan? In view of the reported very attractive cost-benefits ratio of such a government funded space program, why has the Minister apparently rejected out of hand and without parliamentary debate such an opportunity for Australian industry and for future Australian export and import replacement earnings? Senator BUTTON —There have been two responses to the Government's announcement about the space industry, one of the kind which Senator Vigor implies in his question and the other which I have seen in several journals which really make the point that the program the Government announced is in the right directions and is a sensible one given current fiscal restraints. `Fiscal restraints' is an expression which is not in the dictionary of Senator Vigor's questions asked in this Parliament but it is something which has to concern governments. In some way or other we are all involved in the process of government-and the sooner Senator Vigor learns that, the better for us all. Copies of the Madigan report have been available from the Department of Science and my Department. It is not a policy document; it is a report to me, the Minister for Science and the Australian Science and Technology Council. The report to which Senator Vigor referred has not been rejected out of hand; it has been the subject of some 18 months' consideration and consultation between departments, industry and other governments. I thought that we might have been chastised for delay, rather than rejecting it out of hand. Nobody knows whether the investments referred to in the third part of the honourable senator's question pay back their costs. To the best of our knowledge, space programs have been profitable only if government investment in them in various other countries is written off. It is an extraordinary cost-benefit analysis which ignores a large percentage of the costs. There is also the opportunity cost of the Government's investment. Maybe investment in the individual component technologies of space activity, rather than space technology as a whole, would show far greater returns. The Government's plans for supplying equipment in the 1990s and beyond are in the process of being developed. The Government has established, in response to the Madigan report, an Australian space board, which I think was the subject of a thoughtful question from Senator Archer not so long ago. Senator Archer is not nodding his agreement; he is just nodding off. Recently I announced a strategy for the development of the communications equipment industry, which is interwoven, as it were, with space industry matters. There are a number of initiatives taken by the Government which, when put together, present a very satisfactory and responsible response to the Madigan report, and to the honourable senator's question. Senator Vigor proceeding to address a supplementary question to the Minister for Industry, Technology and Commerce- The PRESIDENT —Order! The question is not a supplementary question. It adds additional material and I rule it out of order. Senator VALLENTINE —I remind the Minister representing the Minister for Defence that the Government claims that the so-called joint facilities are good for us because they contribute to deterrence through early warning. I ask: Is it not standard practice in strategic analysis to base conclusions on what others are capable of doing, not on what they say they will do? Is it not a fact that the satellites which provide early warning also provide real time data on the status of the Soviet intercontinental ballistic missile force, data necessary for fighting a nuclear war? Can the Minister explain on what basis the Government accepts United States assurances that it does not want to fight a nuclear war, while maintaining in this country facilities which add to the American capability to fight such a war? Is it just that the Government trusts United States assurances or has it something more solid to rely on? If so, what? Senator GARETH EVANS —Senator Vallentine will not expect me to confirm her speculation about the roles and functions of the joint facilities beyond referring her to the Prime Minister's statement of 6 June 1984, which statement, she will recall, says in part that among the functions performed by the joint facilities is the provision of early warning about missile launches. As to the merits of that early warning capacity, which is the nub of the honourable senator's question, I have to say to her-and I hope she forgives me for the robustness with which I say it-that no sane strategic analyst doubts that the better the early warning available, the less likely a nuclear war is to start. By significantly enhancing the early warning available to the United States our facilities do make a major contribution to preventing nuclear war. Senator Vallentine's concern about the possibility that these capabilities might be used during a nuclear war, should one ever happen, has to be balanced against the certainty that they are being used, right now and every day, to prevent nuclear war occurring. Senator Vallentine asked, finally, on what basis we accept United States assurances that it does not wish to fight a nuclear war. We accept those assurances because we know that whatever particular difficulties we as a country might have with particular aspects of United States policy-conspicuously the strategic defence initiative-we do know that the United States believes, as I know Senator Vallentine believes, that a nuclear war would be a global tragedy of unimaginable proportions-with one estimate of the casualties in the United States alone being 140 million people. The Government finds that fact alone a very solid basis for believing that President Reagan means what he says when he says that a nuclear war must never be fought and can never be won. Senator VALLENTINE —Mr President, I ask a supplementary question. The Minister has trotted out the usual inadequate line about the bases' role in monitoring and verification. How on earth does he explain that when most of the agreements which these bases are meant to monitor and verify were actually put in place after the bases were established? Senator GARETH EVANS —There is a spectacular logic tangle there somewhere, but I do not think it has been perpetrated by the Government. The difficulty is to answer the question with any precision without going into rather more precision about what precisely the bases do. In general terms, I can simply say that early warning and verification are the functions. Early warning is a concept that pre-exists any particular agreement, but verification exists as a concept whatever the particular arms control agreement might be that the bases are helping us to verify. Senator Dame MARGARET GUILFOYLE — I have noted the recent statement of the Minister for Resources and Energy regarding revenue sharing arrangements for Bass Strait petroleum. I ask: What is the present position of the Victorian Government regarding the foreshadowed action in the High Court of Australia to have the Commonwealth excise disallowed as a deduction from selling prices before the royalty is calculated as a percentage of the net well-head value? Has the Victorian Government advised the Minister of the basis of its proposed action in the High Court or is it likely that this proposed case will be abandoned by the Victorian Government? Senator Walsh —It is only going to make a few more lawyers rich. Senator GARETH EVANS —I cannot help but agree with Senator Walsh that the only people this action will benefit will be some of the legal profession. The matter that is upsetting Victoria about the mode of calculation of royalty and whether it should be done in such a way that it gets a higher dollar return than is the case under present interpretation of the agreement has been pursued on and off by Victoria over a number of years and during successive governments, as Senator Dame Margaret Guilfoyle will no doubt recall. The position that has been adopted consistently by Commonwealth governments is that the language of the agreement, which goes back to the late 1960s, is unequivocally clear: There is no basis for anything other than an emotive argument about the revenue sharing arrangements. Certainly there is no possibility that we can see, with the benefit of all the legal advice available to us-which I have personally scrutinised, for what that is worth-that a challenge to those arrangements through the courts could possibly succeed. It is an old chestnut which has been brought out and dusted off. Whether it will be pursued with any great vigour by Victoria remains to be seen. But it is certainly a course of action which will be vigorously resisted by the Commonwealth. Senator MAGUIRE —My question is directed to the Minister representing the Treasurer. I refer to the substantial devaluation of the Australian dollar in recent months and the Government's desire to boost manufacturing exports. Does the devaluation suggest that the Royal Australian Mint, a public sector manufacturing authority, now has greater potential to win contracts to produce coins for other countries? If so, will the Government take the necessary steps to enable the Mint to take advantage of this new-found competitiveness? Senator WALSH —The Mint is currently producing coins for Tonga and the Cook Islands and has just finished a run of coins for Fiji. I was a bit surprised to learn recently that Canada is presently producing New Zealand's coins and that Papua New Guinea may have had coins minted in the United Kingdom or in Canada. If I remember correctly, normally the Australian Mint has produced coins for New Zealand. Obviously the devaluation has made the Mint vastly more competitive than it would otherwise have been and it ought, therefore, to be well placed to obtain further contracts from other countries. I will ask the Treasurer to investigate the possibility and probably report on just what efforts the Mint is making. Senator HAMER —My question is directed to the Minister representing the Treasurer. I hope the Minister recalls that on Tuesday I asked him the following question: Did the Government ask the Commissioner of Taxation for a detailed report on the likely impact of the fringe benefits tax, including specific problems likely to arise, before the tax became law? If so, did the Commissioner identify any of the unintended consequences that have now caused the Prime Minister to order a review of the tax? If he did, why did the Government proceed with such obviously defective legislation? Can the Minister representing the Treasurer now answer the question? Senator WALSH —I am trying to recall what I said on Tuesday, but I think I said that I did not know whether the Commissioner of Taxation had prepared a report of that type or not and that I would see whether the Treasurer had one to supply to Senator Hamer. I am afraid that one has not been supplied to me yet, but I will remind the Treasurer again. Senator HAMER —Mr President, I ask a supplementary question. That is not in fact what the Minister said. The Minister said that he did not know and, as far as I could gather, he did not care. But is the Minister saying, in view of the problems that the FBT has created, that he has not bothered to inquire whether the Taxation Commissioner was consulted? If the Taxation Commissioner was not consulted before the new tax was introduced, why was he not consulted? Senator WALSH —Mr President, I am no more responsible for taxation policy than I suppose any other member of the Cabinet. I have no responsibility at all for taxation administration. That is the job of the Treasurer. Senator Hamer —You are representing the Treasurer. Senator WALSH —It is true that I have responsibility for answering such questions here. I have already said that I will see, firstly, whether the Treasurer does have such a report and, secondly, if he does, whether he is willing to make it available. I think the answer to the second part would be no, but I cannot say that for certain. Senator ZAKHAROV —My question is directed to the Minister representing the Minister for Local Government and Administrative Services. Are the recently discussed proposals to limit smoking in Public Service offices to be extended to the Commonwealth drivers' work environment, namely, Commonwealth cars? Senator GIETZELT —I think most honourable senators would recognise that I have very strong views about smoking. Of course, there is a measure of support in this chamber for looking after the rights of non-smokers. The Government has, through the Public Service Board, established criteria for smoking in Commonwealth offices. I am advised by the Minister whom I represent in this place that, notwithstanding the Public Service Board's attitude to smoking in Commonwealth offices, there are no current proposals further to limit smoking in Commonwealth cars. Public servants are required to comply with non-smoking initiatives in their work place and comparable initiatives in car fleets would require that drivers take responsibility for enforcement if we were to apply that principle to Commonwealth cars. As I indicated, I am sympathetic, as is the Minister whom I represent in this place, to a campaign for a smoke free environment and that, of course, includes taking into account both the passengers and the drivers. Instructions have been issued by the Minister, through his Department, requiring that drivers not smoke in cars and no-smoking symbols have been issued to encourage voluntary limitations on smoking. So it is a matter of drivers and passengers being co-operative. Senator SHORT —I refer the Minister for Finance to the speech made last night by the Labor Premier of Victoria, Mr Cain, and referred to in an earlier question by Senator Messner, in which Mr Cain said that the actions of investment fund managers in investing funds off-shore are `appalling'. Is it the fiduciary responsibility of superannuation fund managers to obtain the best return on investment for their contributors? If so, how does this responsibility relate to Mr Cain's assertions, given that investment off-shore in recent years has yielded greater benefits for superannuation fund contributors? Finally, is it within the power of the Victorian Government to legislate or take other action to restrict off-shore investment by Australian superannuation funds? Senator WALSH —In response to the last part of the question, I do not know, although I would think that a State government would not have such power. I will see whether the Treasurer will give a ruling on that. I think Senator Short addressed his question to me as Minister for Finance. It would have been more appropriate if it had been addressed to me as Minister representing the Treasurer because, as I have already said, the only responsibility the Finance ministry has for superannuation is superannuation of the Commonwealth's own employees. It has none for private sector superannuation-that is within Treasury. On the other question of the responsibility of fund managers, again I do not really know but I would expect that there would be some-I am sure there are some-statutory obligations and perhaps others on fund managers. There would be some variation within that, according to the articles of association. Again, I will see what the Treasurer has to say about that. In respect of whether there is any legal obligation, I think there is certainly a very strong moral obligation on the funds which, after all, enjoy massive tax concessions in Australia to take the national interest into account as well. Senator JONES —My question, which I direct to the Minister for Finance, concerns a rally of 150 people held in Brisbane in opposition to the fringe benefits tax. Is this pitiful turnout consistent with the turnout at rallies in other capital cities recently despite huge advertising campaigns of misinformation conducted by the organisers? Does this very public response to the ranting of the rorting few indicate that the vast majority of taxpayers are aware that it is a fair and just tax and that a greater tax burden has had to be shouldered because of the rorting few within the community? Senator WALSH —I did not know about the rally that was held in Brisbane, although I do know that a group of particularly nasty and anti-social people are trying to whip up an hysterical campaign against the fringe benefits tax. As Senator Jones's question suggests, the facts are grossly misrepresented. As two examples of the gross misrepresentation of the facts I cite the National Farmers Federation campaign orchestrated by the Elders-IXL Director and John Elliott's friend Ian McLachlan, trying to stir up hysteria among farmers, 85 per cent of whom will not be affected at all by the tax. Of course if the tax were to be repealed the revenue would have to be recovered in some other way. One way in which the revenue might be recovered, particularly by a Liberal government, would be to end the 100 per cent rebate of excise on farm distillate. When John Howard was Treasurer the farmers did not get the 100 per cent rebate of that excise. If the Liberals came back into power again that is probably one of the things they would do in order to cover the huge amount of revenue that would be lost from the repeal of the fringe benefits tax. That is something that farmers ought to bear in mind. Not only are 85 per cent of them not affected by the fringe benefits tax but if it were repealed it would be replaced by some other tax which would affect 100 per cent of them. In other words they are mugs being taken for a ride by a politically motivated campaign. Indeed, they are being given very bad leadership by Mr McLachlan and his crew. The second gross misrepresentation again involves Mr McLachlan, this time in company with Andrew Hay and Mr Ansett. That campaign states that the average small business will have to pay $6,000 in fringe benefits tax. If that were true the revenue yield would be of the order of $2 billion from the small business alone, and probably a larger amount from big business. So there are two examples of gross misrepresentation and abuse of the truth by the members of the New Right who are dictating policy to this Opposition. Senator ARCHER —I ask the Minister representing the Minister for Transport and Minister for Aviation a question and refer him to his answer on 8 October concerning the near miss incident involving two Australian Airlines Airbus aircraft over the Great Australian Bight on 28 September. The Minister will recall describing that incident as a departure from proper standards of air safety and alleging that it had occurred because, as he said: It appears that one of the aircraft had requested and received permission from Air Traffic Control staff to alter its original track to save fuel. Is the Minister aware that an air traffic controller has since been suspended? Is he also aware that the Federation of Air Pilots has rejected the version of the incident given by the Minister to the Senate on the basis that there was no request from either pilot to change course and that the aircraft were operating completely at the direction of air traffic control? Can the Minister confirm that the facts are as I have stated? If so, will he correct the answers given last week? Senator GIETZELT —I do recall the question and answer somewhat along the lines to which Senator Archer has referred. I understand that an inquiry has been initiated by the Department of Aviation on these matters because there is a conflict of views as to the origins of the problem that existed, and until that inquiry has been completed I am not able to confirm who was at fault. Senator GARETH EVANS(Victoria-Minister for Resources and Energy) —I seek leave to make a statement on behalf of the Special Minister of State (Mr Young) relating to counter terrorism in Australia. Leave granted. Senator GARETH EVANS —I seek leave to incorporate the statement in Hansard. Leave granted. The statement read as follows- The Government has recently completed a review of counter-terrorism capabilities in Australia and of the administrative and financial arrangements which support them. The Government initiated this review in December 1985. It was then some six years after the report of Mr Justice Hope had established the current arrangements and in the light of the upsurge of terrorism in Europe and the Middle East during 1984 and 1985 it was timely to review Australia's arrangements. The events of 1986 have confirmed the timeliness of the review. The review was carried out by my Department in consultation with other appropriate departments. As part of the review, I made a visit in June to Italy, France, the Federal Republic of Germany, the Netherlands, the United Kingdom and Japan, where I had discussions on counter-terrorism with relevant Ministers, and with police and security agencies. I was also briefed in detail on airport security arrangements in those countries. THE TERRORIST THREAT TO AUSTRALIA Australia is fortunate in not having disaffected domestic political or separatist groups who resort to terrorism, such as have many countries in Western Europe. We are also geographically distant from the main centres of international terrorism. We have not entirely escaped terrorism. Major incidents in the past include: the murder of the Turkish Consul-General and his bodyguard; the bombings of the Israeli Consulate-General and the Hakoah Club; the wounding of the Indian Defence Attache and the kidnapping of the attache and his wife. Nor should we be complacent about the future. It is important, however, that we not lose a sense of proportion and base our arrangements for counter-terrorism on worst-case scenarios; rather we need to make a sober and rational assessment of the threat. It is here that Australia's intelligence agencies and our links to international agencies play a vital role. Even though Australians have been the innocent victims of incidents overseas and in this country, the present assessment is that there is currently no evidence to indicate that Australia is a chosen target of any international terrorist group. It needs to be borne in mind that Australia has close historical and political ties with a number of nations which are under high terrorist threat and which have substantial interests in this country. These interests may well be seen as attractive targets by terrorist groups. The threat of terrorist attacks against targets in Australia is assessed by ASIO as low now and in the foreseeable future. This low threat is international in character, although we must face the possibility that some overseas terrorist groups may have a very few supporters in this country. Bombings and assassinations are the methods of attack currently preferred by terrorists and I am advised that this is likely to apply to any attacks which may be carried out in Australia. The Government recognises that the source and the nature of the threat can change rapidly, but it accepts the advice that the current low level of threat against targets in Australia and the likely international emphasis on bombings and assassinations can generally be expected to persist for a period. The Government will therefore ensure that preventive and contingency measures against terrorism give the highest priority to these most likely forms of threat. CONCLUSIONS OF THE REVIEW I now wish to inform the House of the findings of the review and the Government's response. Acting on advice from the Secretaries' Committee on Intelligence and Security, the Government will not be publishing the report of the review. A complete copy has been made available to the Leader of the Opposition and a version with only minor editing will be made available to the States. In general terms, the review concludes that an effective national counter-terrorist capability has been established in Australia. This follows the creation of the Standing Advisory Committee for Commonwealth-State Co-operation on Protection Against Violence, known as SAC-PAV, in 1979. The picture today is vastly different to 1979. There is an atmosphere of co-operation between the Commonwealth and the States that could not have been foreseen seven years ago. Through SAC-PAV, the Commonwealth has provided the States with compatible equipment and helped to develop among them similar levels of expertise. The relevant Commonwealth authorities can now interact with each State more easily, and are more likely to be invited to do so. The State governments and police forces can also more readily interact. Extensive crisis management machinery has been developed that can be activated in response to a terrorist incident anywhere in Australia. A highly skilled and well-equipped counter-terrorism force has been established within the Defence Force to respond, as a measure of last resort, to requests to resolve terrorist incidents by force. Every State now possesses a capability to cope with siege-hostage incidents, at least those of relatively short duration. All States have a raised capacity to deal with bombings. PREVENTIVE MEASURES The review emphasised that the single most important preventive measure against terrorism is the capability to produce timely and accurate intelligence. The Commonwealth's principal agency for gathering and evaluating security intelligence is ASIO. That Organisation's particular role was, of course, thoroughly examined by the recent Royal Commission conducted by Mr Justice Hope. Co-operation between intelligence and law enforcement agencies, both in Australia and internationally, is vital in the area of counter-terrorism. This was a point strongly emphasised to me by all concerned during my overseas visit. The review reported general satisfaction with co-operation between the agencies in Australia. Relative to many other nations, Australia has a greater capacity to prevent known or suspected foreign terrorists from entering this country. The review emphasised the importance of the security-checking mechanisms now in place with several foreign security services which could provide information on the movement of terrorists in time to prevent their entry into Australia. The Government accepts the importance of these mechanisms. The review further recommended that current entry control procedures be maintained, including the necessity for visitors to Australia to obtain visas. These recommendations will be taken into account by the Government in any future examination of this issue. The review drew attention to the need to enhance the protection of Commonwealth explosives and weapons and to make a careful assessment of the threat posed by other sources of dangerous materials of potential use to terrorists. As a result of the review, action is being taken to upgrade our performance in this area. PROTECTIVE MEASURES The protection of potential targets is a vital measure in any country's fight against terrorism. This is an area of change in the Commonwealth as a number of the former protective roles of the Australian Federal Police have passed to the Australian Protective Service. The Government sees the advantage to both the development of the AFP and to the performance of protective functions in this change. There are Commonwealth-State arrangements for the protection of holders of high office in Australia or dignitaries who may be visiting Australia. The very considerable resources and the degree of co-ordination required have been recently demonstrated in the visit by the Indian Prime Minister. The forthcoming visit of the Pope will also be a major exercise. While this task must remain primarily the function of the particular State police forces the review has pointed to the need for agreement on minimum standards of protection in response to different levels of threat. This will be pursued in the SAC-PAV forum. REACTIVE MEASURES Australia needs to be prepared to respond if preventive measures fail and a terrorist incident takes place. A major element of Australia's response to incidents of terrorism is a policy of no concessions, other than tactical ones, to terrorist demands. That policy has been considered and re-endorsed by the Government as a result of the review. The review pointed to the need for some improvement in the information flow to Commonwealth Ministers during a terrorist incident to enable them to make any necessary policy decisions. This need has emerged during a number of Commonwealth-State joint exercises. The review also pointed to the need to plan and train for post incident investigations and other actions which would form a major part of the response to a `hit and run' incident, such as an assassination or a bombing, if we are to improve the chance of apprehending offenders and hence reduce terrorism. The Commonwealth will be looking to the SAC-PAV to extend its exercise program to test arrangements for Australia's response to this wider range of incidents. There may be terrorist incidents arising overseas in which Australian interests would be heavily involved and in which Australia could be called upon to assist. The Government is examining the complex issues raised by such situations. AVIATION SECURITY It is clear from international experience that airports and aviation, particularly international aviation, are prime targets for terrorist attack. On my visit to Europe I was struck by the very particular attention being paid to high risk flights at major European airports. The flights of certain airlines and flights to and from certain destinations are given very special attention; otherwise more routine precautions prevail. Fortunately, the terrorist threat to aviation in Australia is assessed as low. Our aviation security arrangements fully meet all of the ICAO standards. Nonetheless, it is important that we keep the security needs of our airports under constant review so that we can ensure that we are prepared to face any problem which may arise. In the light of the review's recommendations, bomb and weapon search procedures are being reviewed to ensure that these continue to be adequate for the prevailing circumstances. The current system of issuing passes to people for access to security areas of airports is also being looked at to see what strengthening might be desirable. The Government is also concerned with the broader aspects of physical security measures at airports and is taking action to improve current arrangements. My Department and the Department of Aviation have established a joint task force on proposals to improve aviation security at all Australian airports. The difficult question of policing of airports was addressed in the review. At present, uniformed Australian Federal Police are present at Australian airports. Their role in a terrorist incident would be one of containment until the arrival of State police. Inevitably, as a visible presence, they are called upon to undertake something of a community policing role, which properly belongs to State forces. There has been criticism of the numbers of AFP members at airports for counter-terrorism purposes. This criticism is not supported by the AFP on the basis of the present threat and current national planning for a counter-terrorist response. It is also worth mentioning that the AFP has other roles and often considerable resources at airports working in intelligence, drugs and other operations. The review canvassed the options of a special airport branch of the AFP but favoured rather the transfer of the counter-terrorism protective function to the States. This was seen as better, meeting any possible problems of two forces in one incident and offering greater flexibility should the threat increase. I will be discussing this possibility with the AFP, the Australian Federal Police Association and the States and will then bring forward a further submission to the Government. BOMBING INCIDENTS Bombings have been the most common type of terrorist incident in Australia and are expected to be the most likely form of such incidents in the future. While bombings are assessed as the major threat from terrorists, the Government is concerned that this should be reflected in the attention given to the subject by the SAC-PAV and in the allocation of money to the SAC-PAV by the Commonwealth. Provision has been made in 1986-87 to expend $350,000 on bomb disposal and related equipment. We are planning next year-1987-88-to spend the entire SAC-PAV plant and equipment vote on equipment that will further enhance our anti-bombing capacity. The review highlighted, among other things, the absence of SAC-PAV exercises aimed at testing bomb response capabilities. As a direct consequence of this finding, a bomb response seminar is to be held in Canberra on 5 November 1986. The seminar, to be attended by Australian and overseas experts in forensic science, counter-terrorism and explosives, will examine Australia's preparedness to respond to world-wide trends in the use of explosives by terrorists. In addition, the SAC-PAV has been asked to develop a bomb response strategy for the next three to five years with the emphasis on equipment, training and personnel requirements. This proposal will be discussed further by the bomb response seminar and the 16th meeting of the SAC-PAV in November 1986. FINANCIAL ARRANGEMENTS Finally, there was an examination of the financial arrangements as between the Commonwealth and States. Since 1980-81 the Commonwealth has spent about $10m on equipment, ammunition and training through SAC-PAV. Annual costs for counter-terrorism aspects of ASIO, the Defence Force, the AFP and my Department amount to about $30m. A variety of alternative options was considered, including a `user pays' principle, a fixed Commonwealth-State contribution ratio and a Commonwealth-only option. The mechanisms necessary to control the financial contributions made by the Commonwealth through the SAC-PAV towards the national capability was canvassed. The review concluded that the present financial guidelines, with some minor administrative adjustments, should be maintained. The Government accepts that recommendation and will continue to provide financial support through SAC-PAV within modified guidelines. CONCLUSION The Commonwealth will seek the continued co-operation of the States and the Northern Territory in putting into effect measures arising out of the review. The Prime Minister is writing to the premiers and the Chief Minister following the review. The Government acknowledges the excellent level of co-operation which has already been achieved. Terrorism, by its very nature, recognises neither geographic nor political boundaries. Although the threat is currently assessed as low, there will be no reduction in our vigilance nor in the maintenance of the national capability. Senator GARETH EVANS —I move: That the Senate take note of the statement. Senator ARCHER(Tasmania)(3.05) —National security cannot be compromised, and whether this is by armed forces, organised terrorists or individual fanatics, the nation must have the capacity to respond both effectively and quickly. There has to be an adequate deterrent element as well, and this report covers these aspects. May I say, first, that I have been most impressed by the capabilities and preparedness of the Special Advisory Committee for the Protection Against Violence and its chief, Mr MacKenzie-Orr. I have participated in one of its exercises and I suggest that if anyone with terrorist sympathies is listening he ought to think twice before he proceeds. The report, as a progress and reassessment report, was necessary and I believe that the statement made by the Minister for Resources and Energy (Senator Gareth Evans) clarifies the matters of importance and the various issues that are under consideration. There is the general view at large that Australia has a minimum risk factor. I hope that this is so, but I would not want us all to fall into the trap of believing that we have no potential problem. We have, and we do need to keep it under constant re-appraisal. As yet we believe that we are not a chosen target, but we cannot say that that will always be so. Bombings and assassinations can occur and we have to be ready to act. The job that SAC-PAV has done to co-ordinate the efforts of all the interests involved in terrorism is excellent. It has come a long way but still needs to look forward to the next eventuality or possibility. The provision of comparable equipment, for instance, has helped the co-ordination considerably, and its general standard of preparedness is excellent. We certainly now have a highly motivated, skilled and well equipped anti-terrorist force in Australia, but I hope we may never need to see it in action. Intelligence-the work done primarily in Australia by the Australian Security Intelligence Organisation-is also critical, as is the co-operation between it and the police forces. The arrangements that have been made between the Commonwealth and State authorities in all these areas also have been improved tremendously. In 1979 Mr Justice Hope said: The first line of defence against terrorism is intelligence. How true that is. Our intelligence forces, as a result, must be right up to the mark, and the Government must stifle any efforts, whether from within the Australian Labor Party or from outside, that would impair or frustrate the efficiency of ASIO in any way. We have a great and natural capacity for some protection both by our location in the southern hemisphere and by our geographical separation from other countries. I say `some protection', but we must make it as secure as we can, and secure all the time. We need to keep our policy of no concessions fully understood. In itself it is a sound protective measure, even taking into account all that it implies. Airport security is carefully reported in the statement. Over the past few years there have been many comments made about the degree to which we have adequate airport security. It is often said that airport security is unco-ordinated and inadequate and this is regularly debated by the people involved. Amongst the issues raised in the report on the subject are the access of visitors to departure lounges, the more careful screening of all people with regular airport access, and care that airlines with doubtful reputations are not admitted to our airports. We need to bear all this in mind when having regard to the fact that over the last 10 years the number of visitors to Australia has more than doubled. We do not wish to see our system of granting visas in any way watered down. It is very important that we have adequate notice of who is coming to Australia and that we are able to check on them as they come in. I would not wish to see anything happen that would weaken this system. The policing of our 12 international airports is still not determined, and to say that another round of discussions will be held is barely adequate. I hope that the Government not only discusses this but gets on and makes the changes that are necessary. We must take into account the fact that there could be elements of a fifth column in Australia that could actually support terrorist regimes and which may show succour to their adherents and operatives. Similarly we cannot ignore the possibility that persons involved in organised crime may indulge in extreme actions at some stage. there is absolutely no room for complacency. I am pleased to see the Minister's statement, but it is not the statement that is important; the important thing is how the Government goes about taking action on how long that will take. I seek leave to continue my remarks later. Leave granted; debated adjourned. Senator GIETZELT(New South Wales-Minister for Veterans' Affairs) —On behalf of the Minister for Defence, Mr Beazley, I seek leave to move a motion relating to the seventy-fifth anniversary celebrations of the Royal Military College, Duntroon. Leave granted. Senator GIETZELT —I move: That the Senate congratulates the Royal Military College, Duntroon, on the 75th Anniversary of its foundation, noting with deep appreciation that- (a) it has played a vital role in educating and training Officer Trainees for service in the Australian Army; (b) the product of its efforts has performed with fine distinction in 2 World Wars and in Korea, Malaya and Vietnam; and (c) its reputation for developing officers respected by all Australians and by defence forces overseas is well known. The Senate wishes former and present cadets, staff and all those associated with the College best wishes for its seventy-fifth anniversary celebrations. Also, I propose that the good wishes of the Senate be formally passed to the Commandant of the Royal Military College. Senator CHANEY(Western Australia-Leader of the Opposition)(3.11) —I indicate that the Opposition supports this motion and I associate the Opposition very firmly with the sentiments which are expressed in it. Far too seldom do we acknowledge the contribution which is made by our service men and women, both present and past. The role of the Royal Military College, Duntroon has been a very distinguished one and one of which we are very proud. It is utterly appropriate that the Government should on this occasion move this motion to acknowledge this very important anniversary. I have very great pleasure on behalf of the Opposition in wholeheartedly supporting the Minister for Veterans' Affairs (Senator Gietzelt) in moving this motion and in extending to those who are presently associated and who in the past have been associated with the Royal Military College, Duntroon our congratulations on a fine record and our thanks for many jobs well done. Senator NEWMAN(Tasmania)(3.12) —I am very glad to take this opportunity to support the Minister for Veterans' Affairs (Senator Gietzelt) in his most gracious motion for the Royal Military College, Duntroon. As a wife and mother of graduates of the college I well know the fine standard of leadership that has been produced for Australia over its 75 years. The graduates have gone out into the Army, of course, as leaders, and they have also gone out into the nation as leaders. I am sad to see, from a nostalgic point of view, that the college no longer serves the purpose for which it was originally established. Nevertheless, I am glad to think that it will have a continuing identifiable role in serving the Army. I am very grateful that the Government took this opportunity to recognise the contribution which this institution has made over 75 years. While maybe it does not have the glamour of the boys in blue on Sydney Harbour, it is appropriate that its contribution should be recognised in this place. Question resolved in the affirmative. Bill received from the House of Representatives. Ordered that the Bill may be taken through all its stages without delay. Bill (on motion by Senator Gietzelt) read a first time. Senator GIETZELT(New South Wales-Minister for Veterans' Affairs)(3.14) —I move: That the Bill be now read a second time. I seek leave to have the second reading speech incorporated in Hansard. Leave granted. The speech read as follows- This Bill contains amendments to Social Security and Veterans' Affairs legislation to implement decisions affecting those portfolios in the 1986-87 Budget. Honourable senators will be aware that, as a result of international economic conditions, there have been significant reductions in Australia's national income. The Government believes that through the Budget and other policy changes, the problems which this creates can be faced squarely and remedial changes put in place quickly and decisively. These changes must be made so that our domestic economy and standard of living can be adjusted to our current circumstances. The Budget therefore incorporates very large reductions in spending, amongst other measures. In making difficult decisions, the Government has sought to ensure that the burden of change is spread as fairly as possible across the community, while maintaining the Labor Party's traditional commitment to the needy. Overall, there are reductions against forward estimates of some $500m in social security. This restraint was achieved with no discounting of indexed rises in pensions and benefits. Within a very constrained budgetary framework, we have been able to steer spending towards some areas of greatest need. And we have continued to tighten administrative procedures in ways that add to the integrity of our programs. Most important of all, nothing in this Budget jeopardises our continuing review and reform of the income security system. Two major decisions included in the Bill which will affect the Social Security Act 1947 are- future six monthly indexation increases to pensioners and beneficiaries will continue to be paid in full, but will be deferred for six weeks, i.e. three pension pay-days, from November 1986; and the measures implemented last year to reduce `poverty traps' in the social security system will be delayed by eight months, until July 1987. The deferral of indexation increases is estimated to save $129.2m in 1986-87 and $111.4m in 1987-88, and the deferral of the `poverty traps' legislation is estimated to save $126.6m in 1986-87 and $196.5m in 1987-88. These are the only changes to the general pension and benefits area. They do not represent major structural change, and involve minimal disadvantage for those in greatest need. In line with the Government's aim to target welfare payments to the most needy, family allowance for student children between 16 and 18 years of age will be income tested. Families with household income-that is, combined husband and wife taxable incomes-over $39,000 will not be eligible for family allowance. Estimated savings from this measure are $20m in 1986-87 and $49m in 1987-88. The Government has also decided to increase some payments in areas which will assist the most needy, particularly young families- additional pension or benefit applicable for a dependent child of a pensioner or beneficiary will be increased by $1 to $17 per week, from November 1986; the rate of double orphan's pension will be increased by $4.30 to $60 per month, from November 1986; The rate of handicapped child's allowance will be increased by $7 to $92 per month, from November 1986; and the rate of mobility allowance would be increased by $1 to $11 per week, from November 1986. Estimated costs from these four measures are- increase in additional pension or benefit by $1 per week: $28.3m in 1986-87, and $44.7m in 1987-88; increase in double orphan's pension by $4.30 per month: $0.2m in 1986-87, and $0.3m in 1987-88; increase in handicapped child's allowance by $7 per month: $1.7m in 1986-87, and $2.7m in 1987-88; and increase in mobility allowance by $1 per week: $0.4m in 1986-87, and $0.6m in 1987-88. Other decisions reflected in the Bill which will further rationalise the social security system are- the current arrangements by which sickness benefit is either reduced or recovered by reference to compensation payable to the beneficiary will be extended to invalid pension, unemployment benefit, rehabilitation allowance and sheltered employment allowance, from May 1987; the level of rent payable for a person to be eligible for rent assistance would be increased from $10 to $15 per week, from December 1986; dual eligibility for both a social security pension or benefit and a war or defence widow's pension would be restructured, from November 1986; and dual eligibility for both a social security pension and Commonwealth educational scheme payment would be removed, other than for current cases, from January 1987. estimated savings from these four measures are- extension of the current arrangements concerning compensation payments: $21m in 1986-87, and $50m in 1987-88-in conjunction with savings from the inclusion of the `appointment formula' in the current sickness benefit arrangements from July 1986; increase in the rent threshold: $8.8m in 1986-87, and $16.1m in 1987-88; removal or reduction of dual eligibility for both a social security pension or benefit and a war or defence widow's pension: $4.1m in 1986-87, and $35.1m in 1987-88; and removal of dual eligibility for both a social security pension and an educational scheme payment-savings in the Education portfolio. The Government has announced a range of measures to tighten the administration of unemployment benefits and so ensure greater fairness in the allocation of limited funds. We are also introducing new arrangements which will improve the administration of widow's pension and supporting parent's benefit. These arrangements are designed both to assist these pensioners and beneficiaries and to ensure that the correct entitlement is paid. In the area of unemployment benefit, the Bill will include amendments by which- unemployment beneficiaries will have to be registered with the CES to qualify for benefit, as from November 1986; beneficiaries will have to lodge their first income statements and applications for continuation of unemployment benefit in person, as from 1 November 1986; and arrangements will be made for beneficiaries aged over 55 years who have been receiving social security payment for a year to have relaxed reporting requirements. Estimated savings from these measures, and other measures not requiring legislation, are $33.9m in 1986-87, and $133.4m in 1987-88. In addition to these measures, youth income proposals announced in the 1985-86 Budget are included in the Bill. The Bill will also amend the definition of `income' which applies in the pension and benefit income tests. The amendment would make it clear that the income test does not create an artificial distinction between capital and income. This development would be inconsistent with the long-standing philosophical approach to the scope of the income test, and would have substantial cost implications, apart from unduly distorting the flow of funds into particular types of investments. The amendment is designed to maintain the current approach to the income test, which will be administered in the same way as it has been in the past. Finally, within the social security area, the Bill will amend the assets test in a number of respects to correct deficiencies found after review. These changes are, as a package, revenue neutral. This Bill also makes some minor amendments to the Compensation (Commonwealth Government Employees) Act 1971 and the Seamen's Compensation Act 1911. The amendments would prevent the application of those Acts to employees of the Northern Territory Government and its statutory authorities, and to seamen working in the territorial waters of the Territory. These persons will, from the commencement of the amendments, be covered by a proposed Work Health Act of the Northern Territory. There are small savings from this change in arrangements. This Bill would also make a number of amendments to the Veterans' Entitlements Act 1986 to give effect to the Government's decisions announced in the Budget. The opportunity is also taken in this Bill to make a number of machinery amendments, the need for which has become apparent from the experience of the last four months since the Veterans' Entitlements Act came into operation. The Bill would, in unison with amendments to the Social Security Act 1947, defer for three pension pay days the payment of increased rates of pensions and allowances which are subject to indexation in accordance with movements in the Consumer Price Index. Indexation of income and property value limits for the purpose of the income and assets test will also be deferred. This proposal would lead to savings of $26.6m in 1986-87 and $23.3m in 1987-88. The Bill would also provide that the rate of service pension payable to a widow who is also in receipt of a war widow's pension, currently payable at $228.20 per fortnight, would be frozen at the rate payable on 1 November 1986. Where service pension is granted to such a war widow at a later date the maximum rate of pension payable would be $120.10 per fortnight. The other main proposal relates to an option to recover from health benefits funds that amount of fund benefit that would have been payable to their contributors who are treated without charge at the expense of the Repatriation Commission. It is emphasised that this arrangement is entirely voluntary on the part of entitled beneficiaries. This proposal would save an estimated $7.2m in 1986-87 and an estimated $10m in 1987-88. Other amendments of a budgetary nature include increases in the rates of certain allowances and pensions. The rates of pension payable to orphans of deceased veterans are to be increased; the rate of additional pension payable to veterans suffering from certain incapacities will be increased, as will the rates of attendant allowance and the rates of clothing allowance. Other amendments are to align the assets and income test provisions with those proposed to be made to the Social Security Act 1947. Similar amendments are also made to the Seamen's War Pensions and Allowances Act 1940 where appropriate. Finally, the Bill will include savings provisions to ensure that rights to seek reviews of certain decisions by the Administrative Appeals Tribunal are preserved and transitional provisions to ensure that money due to the pensioner but unpaid at the death of a pensioner before the commencement of the Veterans' Entitlements Act 1986 may be disbursed under that Act. I commend the Bill to the Senate. Debate (on motion by Senator Peter Baume) adjourned. Debate resumed. Senator SHORT(Victoria)(3.16) —Before the debate was adjourned for lunch I was pointing out some of the changes that have occurred in the health service facilities in this country, and that despite a 25 per cent increase in the Medicare levy in this Budget one will see that the present day rate is very bad indeed compared with when it was introduced in February 1974. The health arrangements under the Labor Government's policies are in a disastrous state. They are deteriorating progressively day by day. In simple terms, it means that Australians are paying very much more for their health services than ever before and are receiving less than they have ever received. In the time remaining to me I will address some of this Government's economic policies; what is wrong with those policies and where we ought to be going in this country. The Treasurer (Mr Keating) earlier this week said in another place that the economic changes were falling into place for the Hawke Government like apples into a slot machine. What a hoax, what a fraud on the Australian people! The Treasurer's arrogance when he discusses these aspects is nothing short of breathtaking. The Treasurer's comments have been pointed out, but they bear constant repetition. This week he has won another award. This time he almost won a wooden spoon award. He failed by a short half head to win the wooden spoon award for the Finance Minister of the world who has done the most harm to his own economy. He was nudged out of first place at the last moment by the Finance Minister of Egypt. It is a tremendous indictment not only of the Treasurer but also of this Government. Australia has fallen in its ranking and reputation in the economic world over the last two years. The Treasurer has been very deliberately, blatantly, and dangerously trying to talk up the economy in recent days. He quoted from the report by Moody's Investor Services Inc. the other day in the other place which is supposed to relate to Australia's performance. He quoted very selectively. For example, he neglected to quote from some of the key parts of the report, those parts which point out the continuing high inflation rate, unemployment increases and current account imbalances in 1986-87. All three key statistics for inflation, unemployment, and the current account are continuing to deteriorate. He failed to point out the failure of the Government to tackle the structural rigidities in our economy. He failed to point out that real interest rates in Australia are at their highest level and they are well on the way to being the highest in the Western world. He failed to point out that the economy is slowing in its rate of growth very sharply. He failed to point out that the escalating debt service charges on our balance of payments will cancel out a large part of any trade gains from the depreciation of the Australian dollar. He failed to point out that the flow of long term funds into Australia is likely to slow as investors show a wariness about Australia's external debt. The reasons for our economic problems are manifest. They are very complex and anyone who pretends that by waving a magic wand and fixing one or other economic aspect we will cure our problems is being simplistic. There is no denying that a real reduction in spending by the public sector is an absolute precondition for the improvement of our economic situation. Senator Gietzelt —Where is the evidence for that? Senator SHORT —The Government of the Minister for Veterans' Affairs has said precisely that but it then fails completely to deliver. The reason it fails to deliver is that there are members of the Government such as the Minister who think that the world can be made a better place by governments spending more and more of the taxpayers' money. The Minister is one of the members of the team in the Government that is causing that to happen. That is why this economy continues to deteriorate. That is why when the Government comes to expenditure constraint it has to hit people in our community who are least able to support and defend themselves. That is why the Government has to weasel its way around on spending cuts and delay increases in the allowable earnings of pensioners by deferring the consumer price index increase. The reason the Government is doing such things is that it does not have the intestinal fortitude to take the difficult decisions required to get a permanent, lasting and meaningful reduction in Government spending. That is the sine qua non of the Government's problem. The delay in the payment of the CPI increase is the reason why members of parliament-I guess this applies to all of us-receive very heart-moving, sincere and genuine protests from movements and representatives of pensioners around this country about the dreadful treatment that the Minister and his Government are meting out. That is the basic problem. The other problems all stem from that. The Government gives no encouragement whatsoever to productive investment in Australia or the free flow of two-way investment. Members of the Minister's Party, such as the Victorian Premier, make outrageous statements, as they did last night in attacking the superannuation fund industry because it has the hide to try to get the best deal for its contributors by investing funds where it can get the best return-and that best return is from investing overseas. Why is that return better overseas? It is better because of the incompetence of the Government running this country, a government which has forced the return on investment down in such a way that funds are forced to go overseas to earn a reasonable return. It is absolutely disgraceful for the Premier of Victoria to blame superannuation fund managers for acting in the interests of their contributors and for the Minister for Finance (Senator Walsh) at Question Time today to have the hide to accuse the superannuation fund managers of a lack of moral responsibility when the moral irresponsibility has arisen from the policies of this Labor, socialist, high spending, high taxing and record high interest rate Government. That is from where our problems all stem. There has been a disgraceful and hypocritical performance by members of the Australian Labor Party. We need a reduction in the total tax burden. If we want business to produce and invest, if we want better returns on investment, we have to get a proper investment climate. What do those opposite do? They up the company rate of tax by 7 per cent to, I think a record level. They impose a whole range of anti-business, anti- investment, anti-employment and anti-growth taxes, such as the fringe benefits tax, the capital gains tax and the swinging increases of taxation across the board. These all stem from the fact that the Government does not have the ability, responsibility or competence to be able to put its house in order. People have woken up to the problems that those opposite have caused this country. It shows in the polls. These are the issues we are facing and the problems that the Government is not tackling. These are the reasons why the Australian people will throw out this incompetent Government at the earliest possible opportunity. Senator POWELL(Victoria)(3.26) —In this cognate debate I will address most of my remarks to the Medicare Levy Bill 1986, which will increase the Medicare levy from one per cent to 1.25 per cent from 1 December 1986. This represents the breaking of an election promise by the Government. That forms the basis of the Australian Democrats' opposition to the Bill. The Treasurer (Mr Keating), in his Budget Speech, excused this broken promise by saying that, even with the savings from health spending cuts of $300m, rising costs will mean that: . . . Medicare levy should be increased so that it makes a greater contribution to health costs and so that Medicare is self-financing. Of course, this is an exaggerated claim. Medicare does not and cannot pay for itself. However, broken promises, Budget pressures and economic crises aside, the escalating cost of the provision of health care must be of concern to all people. It certainly is to the Australian Democrats, particularly because we support a universal system of health care which now comes under threat in the face of these cost increases, the rise in the levy and the pressures on the provision of services. Health care is big business. Expenditure on health services accounts for about $15.5 billion per annum, consuming 7 1/2 per cent of gross domestic product. These costs are rising, not only as a proportion of the GDP but also at a higher rate than the overall consumer price index. In this Budget the Government has certainly moved to try to rein in its spending on direct health care and to reduce the burden on the public purse in several ways, including this proposed increase in the Medicare levy, as well as by a range of funding cuts. But the cuts simply mean that the cost of the care must be borne elsewhere rather than by the Federal Government. There will not necessarily be any reduction in demand or any rationalisation of the administration of services. As an example, the abolition of the bed-day subsidy to private hospitals simply means that there will be an ongoing effect of increasing private hospital costs. Consequently there will be health insurance premium rises and rises in out of pocket expenses-or both. A further consequence with the decline in the numbers of people taking out private insurance will be increased demand on the public hospital system, which is administered at State level. This move will result in no genuine cost reduction, simply a transferring of the problem, responsibility and blame away from the Federal Government and on to State governments. Clearly there will be no gain for anyone. Increasing levies and cutting costs is really no answer nor would be the dismantling of Medicare, which might be the answer we would receive from the so-called alternative Government. The community wants a universal basic health insurance scheme aimed at ensuring access to health care for all, regardless of the ability to pay. The Australian Democrats certainly want such a system. We know that the Opposition would toss it out if it came to government, leaving us with a system in which only those who can pay can afford to get sick. That is no alternative. To reduce escalating health care costs we need a genuine and effective emphasis on preventative health care measures to replace the crisis intervention illness-based system. Health care currently is a misnomer. As well, we need to develop systems of payment and treatment which will encourage the efficient and effective use of health services and discourage overuse and misuse. On that first point, preventative health measures, last week we received the report of the Better Health Commission, entitled, `Looking Forward to Better Health'. In the Budget context, we all need to be able to look forward to better health. Many fundamental issues are raised in the report. The report makes any number of useful recommendations which should be followed. I certainly hope that this report will not be another of the valuable reports which come down to Government and Parliament and which are not followed up as they deserve to be. I draw attention to chapter 1.5 of the report, entitled `Social Impediments to Health Promotion'. If we are to look at genuinely reducing health care costs and talk about health rather than illness, we must bear many aspects in mind. Not the least of these aspects is recognising that, as the report says, `helpful choices are not necessarily equally easy for all members of the community to take'. Personal habits are not always a matter entirely of free choice. People's behaviours are influenced, as the report says, by the behaviour of friends and acquaintances, advertising, what is available in the community in the way of amenities and people's values and beliefs and those of the society as a whole. They are also influenced by personal knowledge, priorities and disposable income. I take an example directly from the report. If a senior executive in commerce or industry chooses to spend an hour twice a week in a gymnasium or jogging, it can be accomplished by a rearrangement of time and the expenditure of part of that person's disposable income. Such a health activity is virtually impossible for a single mother who is looking after two children. Senator Siddons —She would get plenty of exercise anyway. Senator POWELL —Yes, but it would not always necessarily be healthy. That brings me to the other aspect of personal choices, the stresses involved in life-styles and the ability to change life-styles which is dependent, again, on many other aspects of social policy. We cannot avoid these things if we are genuinely to look at reducing health costs. It is already evident that many people in the community, such as that senior executive, perhaps, are making different choices. They should be encouraged. It is quite evident that people's dietary habits are changing. There is a rush on the health food stores. People-such as our senior executive, almost legendary by now-are taking more exercise and generally thinking about what constitutes health. Community expectations are changing and so are our behaviours. Another fundamental problem is pointed out in the Better Health Commission's report. This a matter of great concern. I quote the report: Doctors in Australia are paid to react to, not to prevent, disease. I would go further and say that doctors in Australia are trained to react to and not to prevent diseases. The Australian Democrats' health policy emphasises the need to broaden the training and education of health professionals to include nutrition, contraception, psychology, rehabilitation, family dynamics, human development and so on. It is important that entrance to medical courses should be based on an interview assessment of personality and commitment as well as academic ability in order that this barrier can be overcome. However, even in the event that there is-and there very often is-a recognition by a medical practitioner of the importance of prevention, there is yet another impediment, as the report identifies in chapter 4 entitled `Using Financial Incentives for Better Health'. The problem is that under the system which currently operates there is no financial recompense for medical practitioners who wish to engage with their patients in this kind of preventive exercise. Some of the detail in the report is extremely interesting. The report accepts the fact that many practitioners want to engage in this sort of activity. On the basis of its surveys of the profession it suggests that it was encouraged by the fact that many practitioners see health promotion as part of their role. The Royal Australian College of Practitioners, in a recent survey, found that 70 per cent of general practitioners agreed that over the next 10 years they would devote more time to health promotion. That is encouraging and should save us money. That 70 per cent of practitioners said that they would do so even without remuneration. But only 10 per cent were adamant that they would do so if there were no financial remuneration. The importance of a financial incentive is indicated in the same survey's finding that 95 per cent of general practitioners would devote more time to health promotion if it were remunerated adequately. Sixty per cent were adamant about that. There is an overwhelming community expectation that doctors should provide preventive counselling. There is no question about it. The system needs to be adjusted so that preventive medicine is encouraged and made available if we are to reduce costs. That is one of the issues which should be addressed. The report recommends three possible approaches which should be seriously considered. The first recommendation is that a voluntary capitation scheme should be introduced which would enable participating doctors to provide preventive and curative health care with remuneration. Health maintenance organisations are a second recommendation. As seen overseas, they have the potential to provide preventive health care and hospital-based care. Thirdly, the report recommends an increase in the number of salaried medical officers offering preventive health care in community-based health centres. Health maintenance organisations are receiving a great deal of attention now as a possible addition to the options for provision of health care services. The Government appears to be enthusiastic, but I think we must proceed with caution and not just take the attitude that this system can be transplanted to Australia and almost magically reduce the demand on health care services, reduce costs and build a healthier country. We will need more than that. Since the release of the Government's discussion paper on HMOs there has been growing public debate, which is to be encouraged. A significant contribution to that debate was made by John Logan of the Centre for Independent Studies in the Australian of 2 October. The critical question is whether HMOs will work in the Australian context and in conjunction with Medicare. A careful evaluation of any HMO-type development will be important. The Government must take an active role in ensuring the quality of care. Quality assurance programs, peer review activities and a consumer complaints mechanism would all be valuable, and the details of just how effectively they would work are important. Some form of licensing or accreditation may be appropriate and some form of consumer control or input to management would certainly be desirable. Monitoring by the Government of financial viability of health maintenance organisations and steps to provide guarantees for enrolees in the event of the financial failure of a fund would also be necessary. There seems to be no reason why we cannot adopt in our existing system some of the measures used by health maintenance organisations to cut unnecessary hospitalisation, which has been shown to be a major factor in their ability to cut costs overseas. Measures such as compulsory pre-admission review of a range of treatment options for cases other than emergencies and maternity, independent assessment of the need for ongoing hospitalisation and the payment of benefits for a variety of minor procedures, only if they are performed as day surgery on an out-patient basis, ought to be able to be incorporated within the current system. A further requirement in the reduction of hospitalisation periods would have to be an effective system of follow-up care. The Australian Democrats have always been strong supporters of the third recommendation for the development of community-based health centres. The report refers to community health centres in very positive terms and points out that they generally provide a different approach to health care, especially those with salaried medical officers and support services. A major element in this different approach is the `one-stop' service provision at a community health centre where a range of therapies are available. This is a system which, if developed to its full potential, could play a major role, especially where it promotes and provides access to the full range of therapies and opportunities for counselling towards a more responsible personal approach to health care. The Australian Democrats would also include, as our policy does, the recognition, formal accreditation and increasing integration into the health mainstream of a variety of so-called alternative therapies. These are some of the suggestions which could take us down the track of saving money and, not incidentally, misery through preventive action. If we can develop a system which encourages and rewards individuals for making sensible and appropriate choices leading to better health, a parallel benefit will certainly be a less slavish belief in the technological quick fix, which again is a big cost in the system. We are now increasingly recognising the impact of the costs of the willy-nilly introduction of new technology. Where high tech options are available, there is a built-in imperative to use them-because they are there, they must be used-with no particular evaluation of the balance between individual benefits against community costs. New technologies quickly supersede each other, causing further additional cost, which falls pretty generally on to the public purse. Professor Penington, in his paper `Australia's Health Care System-a time for radical change' of April this year showed that, alongside a 20 per cent per patient overall increase in the utilisation of medical services between 1976 and 1983, pathology expanded by 105 per cent and radiology by 55 per cent. In the blow-out of Medicare spending in the last half of 1985, CAT scans increased by 32 per cent and radiology increased by 12.9 per cent over the same period in the previous year. A major challenge is to assess the technologies and to decide which ones are essential and which ones are not justifiable in terms of the scheme's health dollar. A community which makes better health choices at the individual level will also be less susceptible to the glamour and glitter of the entrepreneurial medical clinic, with its plethora of depersonalised and expensive services, and overservicing would be less of a problem. There are many other challenges. Equitable access to efficient services is the goal, surely, and Medicare is not measuring up. We need to shift the financial incentives to encourage desirable service types at the lowest cost. The interests of health care consumers must come first in an informed environment where people can have a greater influence through access to information on how and which services are provided. As I indicated when I began, the Australian Democrats will be opposing this Bill because it represents a blatant breach of a firm election promise. As has been the pattern on Budget Bills, we will see token verbal resistance from the Opposition but no real action. However, the Opposition does have an amendment to the second reading motion which, in general terms, the Democrats are able to support as it underlines our attitude to the broken promise on the Medicare levy and our belief, as I have outlined today, that there is a much greater need for much more to be done to reduce growing health care costs. I would be quite disturbed, however, if our support for this amendment should in any way be seen as a lack of support for Medicare. A universal, basic health insurance program is firm Australian Democrats policy and we believe that, in order that it should be a healthy scheme, such actions as we have outlined should be taken, and many others. It is only now that the real debate on how the system can be changed and can work within that basic principle of universality and quality of care is just beginning. We feel that it takes far more than the throwing out of the baby with the bath water attitude of the Opposition or, indeed, the attitude of the Government that it will continue to drag more and more money into the system to prop it up because it is something which the Government introduced and, again, something which the Democrats supported. The Government does not want to lose face over this and therefore must keep supporting it with money. We say that there are other ways of changing the system and that we should not simply be wedded to the way the system works now. Perhaps paramount in that is the whole issue of the ability of the Australian people to make better health decisions. As I have said a couple of times this week, I think there is a great deal in the report of the Better Health Commission to guide us in this direction and I hope that the Government and the Parliament in general will accept that report for what it is-a very good guide-post down the road to a more effective and less expensive health care system rather than an expensive illness care system. Debate interrupted. The PRESIDENT —Order! It being 3.45 p.m., under sessional order, I put the question: That the Senate do now adjourn. Question resolved in the affirmative. Senate adjourned at 3.45 p.m. The following paper was tabled: Lands Acquisition Act-Statement by the Minister describing lands acquired by agreement under sub-section 7 (1) of the Act, for specified public purposes. The following answer to a question was circulated: (Question No. 1238) Senator Archer asked the Minister representing the Minister for Science, upon notice, on 13 June 1986: (1) What research is currently being undertaken- (a) by the Commonwealth Scientific and Industrial Research Organization (CSIRO); and (b) by any other authority, under the control of the Minister for Science, relative to the biological eradication or control of: (i) animal, (ii) insect, or (iii) fish pests, in Australia. (2) What research is currently being undertaken- (a) by the CSIRO; and (b) by any other authority, under the control of the Minister, relative to the biological eradication or control of vegetable weeds in Australia. Senator Button —The Minister for Science has provided the following answer to the honourable senator's question: (1) (a) Before answering each part of the question, it is pointed out that biological control of any pest does not lead to its eradication. Successful biological control, by its nature, leads to a significant reduction in prevalence of a pest to a level below an economic threshold, but small pest populations remain in a dynamic equilibrium with the controlling organisms. (i) Animal Pests-CSIRO's research on the biological control of animal (vertebrate) pests is directed at the rabbit and the house mouse. In the case of the rabbit, the roles of the myxoma virus and of predators (dingoes, foxes) in controlling rabbit populations are being studied. This work is concentrated in semi-arid regions as the virus has not proved as effective there as in the higher-rainfall regions. The research is aimed at making the best strategic use of myxoma virus in conjunction with the effects of predators and drought on rabbit numbers. In the case of the house mouse, research is aimed at ameliorating the effects of mouse plagues that occur in the wheat-growing areas of southern Australia. Included in this work along with other aspects of the problem is a study of the feasibility of making use of internal parasites (nematodes) as biological control agents. This work is in its early stages. (ii) Insect Pests-The following research programs of CSIRO are concerned with biological control of insect pests, either directly or through background research relevant to the development of control strategies: Ecology and Control of Insect Pests of Stored Grain Aim: To search for new or better methods of controlling stored grain pests. Countries that import Australian grain have come to demand complete freedom from insect infestation. As all the important grain pests have now developed varying degrees of resistance to all pesticides that are fully acceptable internationally for use with stored grain, the need for new control methods is critical. This program, as well as studying insecticides, is investigating a number of non-insecticidal approaches to grain-pest control. These include high-temperature disinfestation, fumigation, and storage under controlled atmospheres, and the integration of the various control strategies into programs for managing the major pest species. Ecology and Control of Insect Pests of Crops and Pastures Aim: To study insects in crop and pasture ecosystems to gain an improved understanding of insect biology, ecology and dispersal, evaluate their pest status, and devise effective and environmentally acceptable measures for their control. The pests under study include the cotton boll weevil, armyworms, phylloxera of grapes, fruit flies, scale insects, and lucerne aphids. Ecology and Control of Insect Pests of Trees and Timber Aim: To study the biology and ecology of insects that damage useful tree species or that attack timber and other materials, and to develop techniques for their control. Current studies are concerned with the jarrah leaf-miner in Western Australia, the impact of leaf-feeding insects attacking eucalypts in pastoral areas, and with termites. Ecology and Control of Dung and Dung-breeding Flies Aim: To determine the major factors influencing the abundance of buffalo fly and bush fly, both of which breed in cattle dung, and to study the ecology of arthropod fauna of dung. The major objective of the program is to bring about reductions in populations of these flies through biological and other means. A second aim is reduction of dung accumulation in pastures through the introduction of dung-burying beetles. Ecology and Control of Arthropods Breeding on Livestock Aim: To study the biology, ecology, behaviour and genetics of flies and other arthropods breeding on livestock with the broad objective of developing management strategies to obtain regional control or eradication of the pest species. The pests under study are the sheep blowfly, screw-worm fly, and ticks of cattle and other animals. Insect Pathology Aim: To study the interactions between disease-causing micro-organisms (including nematodes) and insects in order to develop environmentally acceptable means of pest control; to provide a quarantine service for screening imported insects for pathogens; and to advise on the rearing of disease-free insects. Pathogenic nematodes have been used to control sirex wood wasp in pine plantations, black currant borer, and black vine weevil. Studies are now focused on pathogenic fungi for the control of aphids, wingless grasshopper, sugar cane grub, banana weevil borer, and rice stem borer. Insect Behaviour Aim: To study the behaviour of insects with a view to obtaining biological and chemical information basic to the development of specific and environmentally acceptable pest-control methods, and an understanding of the biology of insects. Targets of current research include cabbage white butterfly, sheep blowfly, lightbrown apple moth, oriental fruit moth, codling moth, Heliothis species, a number of armyworms, and Queensland fruit fly. Molecular Genetics of Insects Aim: To investigate the use of recombinant DNA techniques in the development of novel methods for insect pest control; to study gene organization, expression and regulation in insects; to study evolutionary divergence at the molecular level; and to study the molecular nature of insect development and physiology. The sheep blowfly program is exploring ways of reducing fly numbers by the release of genetically-modified strains of sheep blowfly. Insect Taxonomy and General Biology Aim: To carry out taxonomic research on the Australian insect fauna and research on the general biology of Australian insects. The correct identification of insect pests and insect predators is crucial to all biological control investigations. Various aspects of insect biology are studies such as the structure and chemistry of cuticles, chemical secretions, nervous and endocrine systems. This helps to explain insect behaviour and resistance to pesticides, and can also indicate weak links that may be exploitable as control measures. (iii) Fish Pests-CSIRO is not engaged in the biological control of fish pests. (b) Nil. (2) (a) CSIRO is actively concerned with the biological control of weeds, either directly or through background research relevant to the development of control strategies. Both terrestrial and aquatic weeds are included. The aim is to study and assess overseas, and subsequently establish in Australia, effective agents for biological control of introduced weeds of economic importance. Current programs are concerned with weeds of European, South African and American origin. They include skeleton weed, heliotrope, St John's wort, ragwort, some of the thistles, spiny emex, mimosa, silver leaf nightshade, salvinia, water hyacinth, and water lettuce. Research is also carried out on the biology and ecology of weeds. The aim is to contribute to the success of the biological control activities by studying the biological characteristics and ecological relationships of major weeds. The weeds at present under study are skeleton weed and some of the thistles. (b) Nil.