Monday, 1 June 1987 The PRESIDENT (Senator the Hon. Kerry Sibraa) took the chair at 2 p.m., and read prayers. The Clerk —Petitions have been lodged for presentation as follows: To the Honourable the President and Members of the Senate in Parliament assembled. The petition of the undersigned citizens of Australia respectfully showeth that: Moreton Island is an invaluable natural resource for Queensland and the world and that mining on Moreton would gravely compromise its unique flora and fauna and its outstanding recreational archaeological and scientific values. Your petitioners most humbly pray that the Senate in Parliament assembled, should urge the government to use its proven constitutional powers to halt sand mining on Moreton by supporting the Moreton Island Preservation Bill. And your petitioners, as in duty bound, will ever pray. by Senator Macklin (from 1,101 citizens). To the Honourable the President and members of the Senate assembled. The petition of the undersigned respectfully showeth that: 1. The Watsonia Army Barracks contains a satellite communication dish, that sends to the United States the information, gathered by the `joint high frequency stations' in Australia and New Zealand, indicating the position of the Soviet naval ships and submarines. This information from Watsonia is combined with data from satellites and underwater sensors to calculate the location of the Soviet vessels with great accuracy. 2. This would make it possible for the US nuclear naval ships and submarines to destroy all nuclear Soviet naval ships and submarines, while the US nuclear submarines, naval ships and bombers launch their missiles in a `first strike' attack. 3. This makes Watsonia a potential nuclear target. A nuclear attack on Watsonia would have a disastrous effect on Melbourne. 4. 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. And your petitioners, as in duty bound, will ever pray. by Senators Cooney (from 271 citizens) and Zakharov (from 90 citizens). To the Honourable the President and members of the Senate in Parliament assembled. The petition of the undersigned respectfully showeth: That we consider the 2 per cent discounting of Commonwealth Occupational Superannuation Scheme pension adjustments on 10 Oct 86 to be a serious breach of trust by the Government. The Commonwealth has reneged on an established commitment as incorporated in Commonwealth legislation and benefit promise pensions are not being paid in full. In particular we resent the long-term effect of the discounting. The pension loss is compounded throughout the life of a pensioner and surviving dependants-into the 21st century for many. We consider this Government-induced penalty to be out of all proportion to the short-term `extraordinary circumstances of the economy' given as the reason for the discounting. Your petitioners most humbly pray that the Senate, in Parliament assembled, should urge the Government to: 1. limit the pension discounting effect of the Superannuation and Other Benefits Legislation Amendment Act 1986 to the period 10 Oct 86 to 1 July 87 so that pensions are restored to the 9 Oct 86 level as a base for the 1987 pension adjustment; and 2. consult with organisations representing pensioners before changing the terms and conditions of Commonwealth Occupational Superannuation Schemes. And your petitioners, as in duty bound, will ever pray. by Senators Cooney (from 10 citizens), Kilgariff (from 18 citizens), Macklin (from 19 citizens) and Short (from 17 citizens). To the Honourable the President and members of the Senate in Parliament assembled. The petition of the undersigned respectfully showeth: That there is widespread community concern about the proposal to irradiate food in Australia. Your petitioners, most humbly pray that the Senate in Parliament assembled, should: 1. Block the introduction of food irradiation into Australia; and 2. Ban the import of cobalt-60 and caesium 137 and caesium 134 to be used to irradiate food products. And your petitioners, as in duty bound, will ever pray. by Senator Macklin (from 797 citizens). To the Honourable the President and Honourable members of the Senate assembled. The petition of the undersigned in the State of Queensland showeth that the electoral system in Queensland, based on a 4 zonal weighted system, is an affront to democracy. The National Party under the leadership of Sir Johannes Bjelke-Petersen is always returned to Government with no opportunity for the voting public to bring about change. Your petitioners point out that under the Queensland voting system the National Party at the State Elections on 1 November 1986 managed to achieve 55 per cent of the seats with only 39 per cent of the votes. This demonstrates that 61 per cent of Queenslanders do not want a National Party Government yet received one. Your petitioners therefore earnestly pray that the Federal Government legislates as a matter of urgency to bring about a democratic system of voting in Queensland State elections based on the principle of one vote one value. And your petitioners as in duty bound will ever pray. by Senator Black (from six citizens). To the Honourable the President and members of the Senate in Parliament assembled. The humble petition of the undersigned citizens of Australia respectfully showeth that: Any proposal to establish memorials to peace, the so-called Aboriginal War and anti-war activists and other left wing causes, at the Australian War Memorial in Canberra, would desecrate the Memorial as a fitting and solemn monument to those who served in Australia's Armed Forces and to those who died in defence of their country. Your petitioners humbly pray that the Senate acts to prevent anything which would desecrate the nation's memorial to Australia's former servicemen and women and war dead. And your petitioners, as in duty bound, will ever pray. by Senator Kilgariff (from 83 citizens). Petitions received. Senator VIGOR(South Australia) —I give notice that, on the next day of sitting, I shall move: That the Senate- (a) notes with extreme regret that as at 28 April 1987 only five television and no radio licences had been converted to the new system of licences (service areas); (b) notes further that the failure of the Department of Communications to process various licence applications quickly has been a factor in the Federal Government's move to concentrate media ownership in even fewer hands; (c) is disturbed by the Government's failure to announce whether there will be an independent review of the Department's broadcasting frequency allocation guidelines; and (d) recognises that the planning capacity of the Department of Communications should be thoroughly examined during a full-scale inquiry into the media. Senator REID(Australian Capital Territory) —I give notice that, on the next day of sitting, I shall move: That the Senate, noting- (a) the Federal Government's self promotion supplement on the `Strategic Plan for Health Care in the Australian Capital Territory (ACT)' which appeared in the Canberra Times on Saturday, 30 May 1987; and (b) the breakdown of the Medicare system within the ACT, calls upon the Government to provide a viable public health system for the people of the ACT and not waste valuable health dollars on blatant self promotion. Senator BOSWELL(Queensland) —I give notice that, on the next day of sitting, I shall move: That the Senate- (a) notes temporary Prime Minister's Hawke's lamentable record of broken election promises, which include: (i) his broken promise not to introduce a capital gains tax, (ii) his broken promise to bring down interest rates, (iii) his broken promise to lower petrol prices by 3 cents a litre, (iv) his broken promise not to increase the Medicare levy, (v) his broken promise not to increase tax levels as a percentage of Gross Domestic Product, and (vi) his broken promise not to have an early election; (b) condemns this track record of deception by the Prime Minister of the Australian public; and (c) notes that, in view of this appalling record of deception, the Prime Minister's statement that `Bob Hawke's word is one of the most valuable commodities in Australian politics' is totally without credibility amongst the Australian people. Senator CHANEY —I refer the Minister representing the Prime Minister to the disgracefully misleading advertisement inserted by the Australian Labor Party in newspapers on Saturday, which contained a quotation ascribed to a person who was described as `Westpac New York Chief', a currency trader in the Westpac Banking Corporation's New York office. I ask whether the Minister agrees with Bob White, the Managing Director of Westpac Banking Corporation, who said: These comments were made not by `Westpac's New York Chief', as the advertisements claimed, but by one of our foreign exchange dealers. The comments were totally inconsistent with the kind of balanced judgment the public normally would expect from Westpac. Is it a fact that the person concerned, who was quoted by the Labor Party in its advertisement, is on about the fourth level of seniority in the New York office of the bank? Does the Minister further agree with Mr White who, in advertisements to counter the deceptive Labor campaign, today has said that at this stage it would `be absurd to place any value on predictions about the post-election value of the Australian dollar'? Will the Minister apologise to the Australian people for this deception or is it the sort of campaign that we must expect from a Prime Minister who has already so blatantly broken his word by calling a July election? Senator BUTTON —Let me refresh the minds of honourable senators about the series of incidents which took place. The morning following the announcement of the election a Mr Foley, I think his name was, who was described, I think, by the Australian Broadcasting Corporation's AM program as a Westpac representative in New York made a statement that if a Howard-Bjelke-Petersen government were to be elected it would be disastrous for the dollar. That is the statement which was made. That statement inevitably, in the context of a forthcoming election, becomes currency within the election campaign. That sort of thing has been so under all governments of all political persuasions. Comments made about matters of public concern become matters of debate in an election arena. If the Opposition is too squeamish to face up to that, it will hear a little more of these unpalatable facts in the next few weeks. I would not get too excited about this issue. I could keep this Senate for half an hour, telling it about the sorts of things that the Fraser Government did with advertisements of this kind and the sorts of allegations that it made. What about its 1977 dial a tax cut campaign? How long did the tax cuts last? They lasted three months after that Government was re-elected to power. The Opposition should not get too squeamish too early. It will have plenty of occasion for it later. Let me say in addition to the comments that have already been made that it is not just the gentleman who spoke on the ABC program the morning after the election was announced who has made those comments about the effects of the election of the former coalition. As Mr Sinclair says, after the election it will sit down and decide what policies it will implement. It is that sort of coalition. Other commentators have said exactly the same thing. Senator Chaney —On a point of order-- Senator BUTTON —If this is getting too unpalatable for Senator Chaney-- Senator Chaney —My point of order simply is that the Minister is clearly debating the question. He has rather sadly joined in this campaign of half truths and deception which the Government has undertaken. Mr President, I simply ask you to refer him to the question, which relates to the misdescription of this individual by the Labor Party in an advertisement which I understand it has now discontinued. I believe that the Minister should be brought back to the question and should stop the debate in which he is trying to obscure the issues about which people are concerned. The PRESIDENT —There is no point of order, but the Minister should not debate the question. I call Senator Button. Senator BUTTON —I do not want to debate the matter any further, if that is what I was alleged to be doing. The gentleman in question was, of course, described on the AM program on the morning in question as the chief currency trader for Westpac. It does not matter what his actual status is; he is a significant person in terms of the Westpac organisation and the New York market, and that is the important thing. Senator CHANEY —Mr President, I ask a supplementary question. Does the Minister agree that this person, who is somewhere down the fourth level of the bank, was described as Westpac's New York chief and does he agree that that is an inaccurate description? Senator BUTTON —If we have to suffer no more marginal inaccuracies than that-- Senator Chaney —This is going to be a good example. Senator BUTTON —If the honourable senator wants me to go through his record again, I will start again; but I do not propose to do so when answering a supplementary question. Senator McINTOSH —My question is directed to the Acting Minister for Foreign Affairs. In the light of the recent disturbing reports arising from the latest military offensive launched by the Sri Lankan authorities in the Jaffna peninsula, can the Acting Minister provide an assessment of the latest developments and the Government's reaction to them? Will the Government make its views known to the Sri Lankan Government? Senator GARETH EVANS —The Government is very deeply concerned by the current Sri Lankan military offensive in the Jaffna peninsula. The offensive follows an escalation of the fighting between government forces and Tamil separatists after a number of terrorist attacks, as we all know, on civilians. The Australian Government deplores the escalation of hostilities in Sri Lanka. Tamil terrorists have been responsible for the deaths of many civilians. Government forces, particularly military aircraft, have, in turn, caused civilian deaths in their attacks on separatists' positions and the present fighting will inevitably lead to more civilian casualties. The Australian Government has called repeatedly-it does so again now-for both sides to exercise restraint and begin negotiations to resolve the conflict peacefully. We have expressed our concern directly to the Sri Lankan Government on many occasions as well as in this chamber, international forums and, of course, in the House of Representatives. This week our High Commissioner repeated these concerns to the Sri Lankan Government in the context of the current offensive. Finally, all I can say is that the continuing bloodshed underlines the heavy responsibility which both sides share not to let the opportunity offered by the proposals which were put forward on 19 December for a peaceful solution slip away. The awful reality is that the alternative to that solution, the settlement as foreshadowed on 19 December, is a very grim one indeed. Senator DURACK —My question is directed to the Minister representing both the Minister for Primary Industry and the Minister for Employment and Industrial Relations. I refer to the question which I asked him last week about the effect of Australian union bans on wheat shipments to Fiji when he indicated that he would check on the facts concerning the matter. I ask: Will the Minister now confirm that Fiji is facing serious grain shortages and that continuance of the bans is placing in jeopardy Australia's $10m wheat trade with that country? Is the Minister aware that a delegation of the Australian Wheat Board has asked the Government to intervene and a delegation is visiting Canberra today to press the point? In view of the failure of the Australian Council of Trade Unions to resolve this matter, I ask whether the Minister agrees with the Deputy Chairman of the Wheat Board, who said: Now is the time for the Government to have this dispute resolved. What action does the Government propose to take to bring this union action, which is in defiance of Government foreign policy, to an immediate end? Senator WALSH —It is known that the Government has urged quite forcefully that the wheat shipments should proceed. I understand that within the last 24 hours discussions have again taken place between members of the Government and the ACTU and that as a result of those discussions it is expected the matter will be resolved at a meeting this afternoon. Senator COLSTON —I ask the Minister for Education: Has the Government made an estimate of the cost of adopting the proposal that all school students receive a basic grant, regardless of the type of school they attend, as proposed by the Opposition? Is it a policy which the Government would be prepared to adopt? Senator RYAN —I have seen apparent undertakings by Mr Shack on behalf of the Liberal Party to increase funding to private schools. He has talked about giving all schools a basic grant, but it is hard to know what he means since all schools, government and non-government schools alike, receive a per capita grant from this Government. All schools receive a grant, but in the non-government sector those most in need receive a much larger grant than those with high incomes. However, if we try to work out what Mr Shack means, we get some interesting figures. If he means, for example, that those opposite will pay to the two categories of high income schools, those schools which have received no increases under this Government, the same grants as we paid the Catholic parish schools, the cost would be $66m. Since the Opposition is intent on reducing public expenditure to the tune of $8 billion we can only assume that that $66m for the top two categories of schools would have to come from the poorest schools in the non-government sector or from government schools. Senator Teague —I rise on a point of order, Mr President. The Minister's remarks are hypothetical and speculative. The Minister is called upon to speak within the terms of her portfolio responsibilities. Because what she is saying is hypothetical-in fact, it is rubbish-I submit that she should be asked to resume her seat. The PRESIDENT —Order! There is no point of order. The Minister can answer the question in any way she sees fit. As long as she does not debate the matter, she is in order. Senator RYAN —Mr President, I am certainly not debating the question, as you are aware. It is a matter of interest to parents, students and teachers in government and non-government schools throughout Australia that these proposals are being floated, and people want to know what they mean. It is hard to work out what they mean since no dollar figures have been attached, but if, for example, all non-government schools were to be put into the highest category of funding-category 12-it would cost over $150m. If that is the proposal Mr Howard will tell us about when finally he gets around to a policy speech, we will be very interested to know at whose expense that $150m will be spent. There is also an undertaking to abolish the 12- category scheme and bring in three categories of school funding. Again, does that mean that schools that will be shifted from the nine categories that are not abolished into three categories would lose money or gain money? If they would lose money they are entitled to know that; if they would gain money, they should know how much and at whose expense. It is also worth working out that the 12-category scheme was introduced after extensive consultation with the non-government sector and was welcomed by that sector. I think that Mr Shack and his colleagues on the other side of this chamber are having a great deal of difficulty getting a schools policy together since the policies of the Hawke Government have been so widely acceptable and successful. That reminds me that at Question Time on Friday I was asked by one honourable senator opposite to table the letter from the National Catholic Education Commission, which demonstrates that that major body, which has a policy of involvement with most non-government schools throughout Australia, is entirely in agreement with the Government's policy. I now table that letter for the interest of honourable senators. Senator HAINES —I direct my question to the Minister representing the Minister for Employment and Industrial Relations. Has the Minister seen the television advertisement sponsored by a range of organisations, including the National Farmers Federation, purporting to explain the implications of the now deferred Industrial Relations Bill? Does the Minister agree that the contents of the advertisement show considerable confusion about the relevant statute law and common law applying to industrial relations? Does the Minister intend to counteract this campaign with factual information about this extremely important area of law? If so, when would a response to the campaign be likely to start? Senator WALSH —I have seen twice the television advertisement referred to and I have been supplied with a copy of the text within it. I must say that I thought that the one I saw was sponsored entirely by the National Farmers Federation. I am open to correction, but that was my quick reading of it. It follows the same line as other misrepresentations of the provisions of the Industrial Relations Bill. It attempts to plant the lie that if the Bill as it was presented to the Parliament a couple of weeks ago were passed, it would no longer be possible for employers to invoke the secondary boycott provisions of sections 45d and 45e of the Trade Practices Act or to take common law action for damages. That is a lie. The Bill proposed to require that, prior to taking action under the Trade Practices Act and the common law, an employer would be required to take the dispute to the Industrial Court. I also understand that the time frame which such an action would require would be shorter than the time frame that was actually recorded prior to the celebrated cases of Mudginberri and Dollar Sweets Co. Ltd being taken to the Federal Court. The National Farmers Federation has stopped a bit short of telling an outright lie. What it has done falls more into the category of a deliberate misrepresentation. In the relevant section the NFF said that the Government was very keen to alter the law so extensively that it would be virtually useless. That, of course, is untrue. It should also be noted that on the question of common law there is an outstanding ambivalence in some quarters. Many people who argue that the employees' common law right to sue employers for negligence should be abolished also argue that no impediment or prior requirement should be imposed before an employer can take a common law action against employees. That is one of the many contradictions which the Federal Opposition and the ratbag Right generally in Australia need to resolve or to be called upon to resolve. My final point is that I find it a bit disturbing, though personally not at all surprising, that the $10m-odd that the National Farmers Federation is reported to have collected ostensibly to launch a publicity or public relations campaign for the farming community is now quite obviously being misused by the NFF's President, McLachlan, as a personal political slush fund and is being spent and misused at the same time as McLachlan himself is touting around for a seat in this Parliament. It is not at all clear whether he intends to represent the National Party of New South Wales, the National Party of Queensland or the Liberal Party of Australia-that is, assuming that any of them would endorse him in a safe seat. It is not clear which of those fractions or factions he wishes to represent. However, it is perfectly clear that he no longer represents those whom he purports to represent, those same people that he has not represented for a very long time. I think that that is rather sad. Senator HAINES —I ask a supplementary question. Could the Minister provide a response to the last part of my question, that is, whether the Government is intending to counteract the campaign in any way at all with some factual information of its own on the issue? Senator WALSH —I am sorry, I was not trying to avoid that part of the question. So far as I know, the Government has no plans to counteract in any formal way the misinformation and outright lies. However, a number of people, including me, will be taking every opportunity that is available to expose the lies and set out the case as it really is. Finally, the argument against the Industrial Relations Bill should be put on its own merit. If the people who are opposing the Bill really have confidence in the soundness and validity of their arguments they should put them on merit and not resort to misrepresentation and outright lies. Senator CROWLEY —Has the Minister representing the Minister for Health seen reports of the call by Professor Penington to scrap bulk billing-a call often used by the Opposition to justify its claim that it would abandon Medicare and bulk billing? Can the Minister explain to the Senate the consequences of scrapping Medicare and bulk billing, particularly as it would affect pensioners? Can he explain the evidence that shows there has been no overuse due to bulk billing, which fact the Opposition continues either to get wrong or to misrepresent? Senator TATE —It is generally recognised throughout Australia that the Federal Government's introduction of Medicare has brought equity and stability into the health and medical care system in a way which certainly was not evident when Mr Howard was Treasurer. Claims that doing away with bulk billing somehow would cut into the so-called overuse of medical services are completely unsupported by the facts. In the last full year of statistics available for the previous Government, Australians received some seven services per year, and under bulk billing they receive at the moment something like 6.67 services per year. It is quite clear that bulk billing bears no relationship whatsoever to the overservicing claims made by the Opposition. The real point for Australian families to consider in relation to the Government's Medicare policy, as opposed to those proposals that emanate and occasionally erupt from the Opposition ranks, is that as far as one can judge-and this is based on figures compiled by the Treasury and the Department of Health, quite independent of any political influence-if the Opposition's health policy were put into effect the cost to ordinary Australian families would be in the region of $27 per week, regardless of the taxable income of the families concerned. In that situation, according to Treasury calculations, a family now paying the Medicare levy only would need to have an income of more than $110,000 a year to be better off under the Opposition's proposal. Even those families which currently have basic private health insurance would need an income of more than $72,000 a year to be better off. The tables that have been produced this morning by the Treasury and the Department of Health show very clearly that a family on average weekly earnings of $23,463 a year, or $450 a week, and currently paying the levy only would be more than $21 a week worse off-that is, it would pay an extra $1,100 a year in health costs-because there is a clear intention on the part of the Opposition to offload some $3 billion of health costs from the public to the private sector. That would have a very interesting effect, by the way, on the consumer price index. The transfer of $3 billion of health costs into the private sector would add some 3.65 percentage points to the consumer price index. So it is very clear from that that not only would there be a very severe impact on families if the Opposition's health policy ever were to be implemented-- Senator Michael Baume —You know that those figures are crooked. Senator TATE —Those figures are not crooked. They have been validated. I am very happy to incorporate in Hansard the three pages of figures produced by the Treasury and the Department of Health to substantiate those claims. I seek leave to incorporate those tables. Leave granted. The tables read as follows- Table 1 ADDITIONAL HEALTH COSTS UNDER OPPOSITION POLICY: FAMILIES WITH NO INSURANCE (50 PER CENT OF FAMILIES) Taxable income Present Medicare Levy (A) Present Insurance Costs (B) Proposed Insurance Costs (C) Rebate (D) Extra health costs No Rebate C-(A+B) With Rebate C-D-(A+B) ($pw) ($pa) ($pw) ($pw) ($pw) ($pw) ($pw) ($pw) 50.00 2,607.00 0.00 0.00 27.00 8.10 27.00 18.90 100.00 5,214.00 0.00 0.00 27.00 8.10 27.00 18.90 150.00 7,821.00 0.00 0.00 27.00 8.10 27.00 18.90 200.00 10,428.00 0.00 0.00 27.00 8.10 27.00 18.90 250.00 13,035.00 0.00 0.00 27.00 8.10 27.00 18.90 300.00 15,642.00 0.00 0.00 27.00 8.10 27.00 18.90 350.00 18,249.00 4.38 0.00 27.00 8.10 22.62 14.52 400.00 20,856.00 5.00 0.00 27.00 8.10 22.00 13.90 450.00 23,463.00 5.63 0.00 27.00 8.10 21.37 13.27 500.00 26,070.00 6.25 0.00 27.00 8.10 20.75 12.65 550.00 28,677.00 6.88 0.00 27.00 8.10 20.12 12.02 600.00 31,284.00 7.50 0.00 27.00 8.10 19.50 11.40 650.00 33,891.00 8.13 0.00 27.00 8.10 18.87 10.77 700.00 36,498.00 8.75 0.00 27.00 8.10 18.25 10.15 750.00 39,105.00 9.38 0.00 27.00 8.10 17.62 9.52 800.00 41,712.00 10.00 0.00 27.00 8.10 17.00 8.90 850.00 44,319.00 10.63 0.00 27.00 8.10 16.37 8.27 900.00 46,926.00 11.25 0.00 27.00 8.10 15.75 7.65 950.00 49,533.00 11.88 0.00 27.00 8.10 15.12 7.02 1,000.00 52,140.00 12.50 0.00 27.00 8.10 14.50 6.40 1,050.00 54,747.00 13.13 0.00 27.00 8.10 13.87 5.77 1,100.00 57,354.00 13.75 0.00 27.00 8.10 13.25 5.15 1,150.00 59,961.00 14.38 0.00 27.00 8.10 12.62 4.52 1,200.00 62,568.00 15.00 0.00 27.00 8.10 12.00 3.90 1,250.00 65,175.00 15.63 0.00 27.00 8.10 11.37 3.27 1,300.00 67,782.00 16.25 0.00 27.00 8.10 10.75 2.65 1,350.00 70,389.00 16.88 0.00 27.00 8.10 10.12 2.02 1,400.00 72,996.00 17.50 0.00 27.00 8.10 9.50 1.40 1,450.00 75,603.00 18.13 0.00 27.00 8.10 8.87 0.77 1,500.00 78,210.00 18.75 0.00 27.00 8.10 8.25 0.15 1,550.00 80,817.00 19.38 0.00 27.00 8.10 7.62 -0.48 1,600.00 83,424.00 20.00 0.00 27.00 8.10 7.00 -1.10 1,650.00 86,031.00 20.63 0.00 27.00 8.10 6.37 -1.73 1,700.00 88,638.00 21.25 0.00 27.00 8.10 5.75 -2.35 1,750.00 91,245.00 21.88 0.00 27.00 8.10 5.12 -2.98 1,800.00 93,852.00 22.50 0.00 27.00 8.10 4.50 -3.60 1,850.00 96,459.00 23.13 0.00 27.00 8.10 3.87 -4.23 1,900.00 99,066.00 23.75 0.00 27.00 8.10 3.25 -4.85 1,950.00 101,673.00 24.38 0.00 27.00 8.10 2.62 -5.48 2,000.00 104,280.00 25.00 0.00 27.00 8.10 2.00 -6.10 Table 2 ADDITIONAL HEALTH COSTS UNDER OPPOSITION POLICY: FAMILIES WITH ONLY BASIC HOSPITAL INSURANCE (14 PER CENT OF FAMILIES) Taxable income Present Medicare Levy (A) Present Insurance Costs (B) Proposed Insurance Costs (C) Rebate (D) Extra health costs No Rebate C-(A+B) With Rebate C-D-(A+B) ($pw) ($pa) ($pw) ($pw) ($pw) ($pw) ($pw) ($pw) 50.00 2,607.00 0.00 9.60 27.00 8.10 17.40 9.30 100.00 5,214.00 0.00 9.60 27.00 8.10 17.40 9.30 150.00 7,821.00 0.00 9.60 27.00 8.10 17.40 9.30 200.00 10,428.00 0.00 9.60 27.00 8.10 17.40 9.30 250.00 13,035.00 0.00 9.60 27.00 8.10 17.40 9.30 300.00 15,642.00 0.00 9.60 27.00 8.10 17.40 9.30 350.00 18,249.00 4.38 9.60 27.00 8.10 13.02 4.92 400.00 20,856.00 5.00 9.60 27.00 8.10 12.40 4.30 450.00 23,463.00 5.63 9.60 27.00 8.10 11.77 3.67 500.00 26,070.00 6.25 9.60 27.00 8.10 11.15 3.05 550.00 28,677.00 6.88 9.60 27.00 8.10 10.52 2.42 600.00 31,284.00 7.50 9.60 27.00 8.10 9.90 1.80 650.00 33,891.00 8.13 9.60 27.00 8.10 9.27 1.17 700.00 36,498.00 8.75 9.60 27.00 8.10 8.65 0.55 750.00 39,105.00 9.38 9.60 27.00 8.10 8.02 -0.08 800.00 41,712.00 10.00 9.60 27.00 8.10 7.40 -0.70 850.00 44,319.00 10.63 9.60 27.00 8.10 6.77 -1.33 900.00 46,926.00 11.25 9.60 27.00 8.10 6.15 -1.95 950.00 49,533.00 11.88 9.60 27.00 8.10 5.52 -2.58 1,000.00 52,140.00 12.50 9.60 27.00 8.10 4.90 -3.20 1,050.00 54,747.00 13.13 9.60 27.00 8.10 4.27 -3.83 1,100.00 57,354.00 13.75 9.60 27.00 8.10 3.65 -4.45 1,150.00 59,961.00 14,38 9.60 27.00 8.10 3.02 -5.08 1,200.00 62,568.00 15.00 9.60 27.00 8.10 2.40 -5.70 1,250.00 65,175.00 15.63 9.60 27.00 8.10 1.77 -6.33 1,300.00 67,782.00 16.25 9.60 27.00 8.10 1.15 -6.95 1,350.00 70,389.00 16.88 9.60 27.00 8.10 0.52 -7.58 1,400.00 72,996.00 17.50 9.60 27.00 8.10 -0.10 -8.20 1,450.00 75,603.00 18.13 9.60 27.00 8.10 -0.73 -8.83 1,500.00 78,210.00 18.75 9.60 27.00 8.10 -1.35 -9.45 1,550.00 80,817.00 19.38 9.60 27.00 8.10 -1.98 -10.08 1,600.00 83,424.00 20.00 9.60 27.00 8.10 -2.60 -10.70 1,650.00 86,031.00 20.63 9.60 27.00 8.10 -3.23 -11.33 1,700.00 88,638.00 21.25 9.60 27.00 8.10 -3.85 -11.95 1,750.00 91,245.00 21.88 9.60 27.00 8.10 -4.48 -12.58 1,800.00 93,852.00 22.50 9.60 27.00 8.10 -5.10 -13.20 1,850.00 96,459.00 23.13 9.60 27.00 8.10 -5.73 -13.83 1,900.00 99,066.00 23.75 9.60 27.00 8.10 -6.35 -14.45 1,950.00 101,673.00 24.38 9.60 27.00 8.10 -6.98 -15.08 2,000.00 104,280.00 25.00 9.60 27.00 8.10 -7.60 -15.70 Table 3 ADDITIONAL HEALTH COSTS UNDER OPPOSITION POLICY: FAMILIES WITH TOP TABLE PRIVATE INSURANCE (36 PER CENT OF FAMILIES) Taxable income Present Medicare Levy (A) Present Insurance Costs (B) Proposed Insurance Costs (C) Rebate (D) Extra health costs No Rebate C-(A+B) With Rebate C-D-(A+B) ($pw) ($pa) ($pw) ($pw) ($pw) ($pw) ($pw) ($pw) 50.00 2,607.00 0.00 19.60 37.00 8.10 17.40 9.30 100.00 5,214.00 0.00 19.60 37.00 8.10 17.40 9.30 150.00 7,821.00 0.00 19.60 37.00 8.10 17.40 9.30 200.00 10,428.00 0.00 19.60 37.00 8.10 17.40 9.30 250.00 13,035.00 0.00 19.60 37.00 8.10 17.40 9.30 300.00 15,642.00 0.00 19.60 37.00 8.10 17.40 9.30 350.00 18,249.00 4.38 19.60 37.00 8.10 13.02 4.92 400.00 20,856.00 5.00 19.60 37.00 8.10 12.40 4.30 450.00 23,463.00 5.63 19.60 37.00 8.10 11.77 3.67 500.00 26,070.00 6.25 19.60 37.00 8.10 11.15 3.05 550.00 28,677.00 6.88 19.60 37.00 8.10 10.52 2.42 600.00 31,284.00 7.50 19.60 37.00 8.10 9.90 1.80 650.00 33,891.00 8.13 19.60 37.00 8.10 9.27 1.17 700.00 36,498.00 8.75 19.60 37.00 8.10 8.65 0.55 750.00 39,105.00 9.38 19.60 37.00 8.10 8.02 -0.08 800.00 41,712.00 10.00 19.60 37.00 8.10 7.40 -0.70 850.00 44,319.00 10.63 19.60 37.00 8.10 6.77 -1.33 900.00 46,926.00 11.25 19.60 37.00 8.10 6.15 -1.95 950.00 49,533.00 11.88 19.60 37.00 8.10 5.52 -2.58 1,000.00 52,140.00 12.50 19.60 37.00 8.10 4.90 -3.20 1,050.00 54,747.00 13.13 19.60 37.00 8.10 4.27 -3.83 1,100.00 57,354.00 13.75 19.60 37.00 8.10 3.65 -4.45 1,150.00 59,961.00 14.38 19.60 37.00 8.10 3.02 -5.08 1,200.00 62,568.00 15.00 19.60 37.00 8.10 2.40 -5.70 1,250.00 65,175.00 15.63 19.60 37.00 8.10 1.77 -6.33 1,300.00 67,782.00 16.25 19.60 37.00 8.10 1.15 -6.95 1,350.00 70,389.00 16.88 19.60 37.00 8.10 0.52 -7.58 1,400.00 72,996.00 17.50 19.60 37.00 8.10 -0.10 -8.20 1,450.00 75,603.00 18.13 19.60 37.00 8.10 -0.73 -8.83 1,500.00 78,210.00 18.75 19.60 37.00 8.10 -1.35 -9.45 1,550.00 80,817.00 19.38 19.60 37.00 8.10 -1.98 -10.03 1,600.00 83,424.00 20.00 19.60 37.00 8.10 -2.60 -10.70 1,650.00 86,031.00 20.63 19.60 37.00 8.10 -3.23 -11.33 1,700.00 88,638.00 21.25 19.60 37.00 8.10 -3.85 -11.95 1,750.00 91,245.00 21.88 19.60 37.00 8.10 -4.48 -12.58 1,800.00 93,852.00 22.50 19.60 37.00 8.10 -5.10 -13.20 1,850.00 96,459.00 23.13 19.60 37.00 8.10 -5.73 -13.83 1,900.00 99,066.00 23.75 19.60 37.00 8.10 -6.35 -14.45 1,950.00 101,673.00 24.38 19.60 37.00 8.10 -6.98 -15.08 2,000.00 104,280.00 25.00 19.60 37.00 8.10 -7.60 -15.70 Senator TATE —I thank the Senate. The fact is that the Australian Labor Party is very much wedded to the idea that at a time of recovering from some illness, major chronic ailment or traumatic car or industrial accident, one should not have terrible expenses added to family and household burdens. The payment of $27 a week required under the Opposition's policy for families to have the sort of health care they have now is absolutely intolerable and certainly will not be countenanced by this Government. Senator Chaney —I ask the Minister to table the document from which he has read, some of which he has incorporated in Hansard. Senator TATE —I table the document. Senator BOSWELL —My question is directed to the Leader of the Government in the Senate. I hope he can face up to it. I draw the Minister's attention to the Prime Minister's statement in February 1983, while he was Leader of the Opposition, that Prime Ministers must see out their terms of office in order to achieve rational business planning and public administration and rule out cynical political opportunism. Does the fact that Australia is now heading for its third Federal election in four years, and the Prime Minister's broken promises on capital gains tax, taxation levels, Medicare levies, fuel prices and interest rates, cause the Minister to have any doubt that Bob Hawke's word is a valuable Australian political commodity, as insisted by the Prime Minister last Wednesday? Senator BUTTON —I am sure that the Prime Minister is a very valuable commodity. The honourable senator should just wait a few weeks and he will see. Senator FOREMAN —Has the Special Minister of State had an opportunity to discuss the Government's recently introduced crime package with the State police Ministers? If so, can the Minister advise the Senate of the results of such discussions? Senator TATE —I am pleased to tell the Senate that the Australian Police Ministers Council met on Friday, 22 May, in Hobart. It was a very successful meeting which was preceded by a meeting of the Intergovernmental Committee on the National Crime Authority. I must say, sitting around the table with Ministers representing various political forces within Australia, away from the glare of publicity and the confrontationist public stances that we sometimes adopt, we engaged in some very fruitful work on behalf of all Australian governments in combating organised crime in Australia. As I say, sitting around that table there were Ministers from all States and the Northern Territory in addition to me, representing the law enforcement agencies and the relevant portfolio of the Commonwealth Government. At that meeting I reported on progress in regard to various elements of the crime package introduced by the Attorney-General, Mr Lionel Bowen, in another place and to be debated here shortly. I will not canvass the elements of that debate, except to say that the package includes the Telecommunications (Interception) Amendment Bill, the Proceeds of Crime Bill, the Cash Transaction Reports Bill and the Mutual Assistance in Criminal Matters Bill. The fact is that this Government takes the view that it is not simply enough to beef up the Australian Federal Police, as we have done under a three-year program, which has increased its resources immeasurably and has increased the recruiting that the Federal Police has been able to undertake in order to meet the Government's objectives set out in the charter given to the Australian Federal Police in August 1985, which of course put the combating of drug trafficking at the top of its list of priorities. It is also not enough to give the National Crime Authority the resources that it has required which have enabled it, as I am sure all honourable senators will agree, to achieve very remarkable successes in its arrests and its bringing to trial of alleged major crime figures in recent months. It was recognisable at that meeting of the Australian Police Ministers Council that following the money trail is a very important part of any successful dealing with organised crime figures. Therefore, new offences such as money laundering, attempting to disguise the tainted character of money, are being introduced. Investigators are being given improved access to important financial records. But, more importantly-and I think this is what captured the attention of the Ministers around the table in Hobart-our legislation will provide for the forfeiture of assets of people convicted of serious offences such as narcotics dealings. There is a strong sense in the community that restitution should be made by those persons who engage in these nefarious activities and accumulate assets as a result. No person should profit from his evildoing, according to an old common law maxim, and that principle is certainly to be incorporated in our attack on organised crime. In fact, we go so far as to say that, in this exceptional instance, the onus should be on the convicted criminal to demonstrate that his assets were lawfully acquired. I believe that the sense of justice in the community applauds this particular move. Of course, this leads to the fact, which I now report to the Senate, that the Australian Police Ministers Council unanimously passed a resolution-as I said, the Council comprised Ministers of various political persuasions-in the following terms: To commend the Commonwealth on its initiatives in attacking the proceeds of crime and related matters. I believe that completely unprompted commendation from the Police Ministers Council-mirrored, I might say, with good support for this package in the other place-indicates that this particular Government is succeeding in bringing forward a legislative framework to supplement the resources that are put into the Australian Federal Police and the National Crime Authority in order to succeed in its attack on organised crime. Senator REID —My question is directed to the Minister representing the Minister for Local Government and Administrative Services. Will the Minister confirm that the owner-drivers who operate Canberra hire cars have been threatened with a black ban if they do not join the Transport Workers Union of Australia? Is it a fact that a Transport Workers Union official confronted Canberra hire car drivers at the transport desk of the Canberra Airport on Friday afternoon with a demand that they either join the union or miss out on government work which makes up about 45 per cent of the hire car business? Does the Government condone this union blackmail? Will the Minister give an assurance that Canberra hire car drivers-who are owner-drivers and not employees-who decide to stand up against this union bullying will not be victimised by being denied government work? Senator GIETZELT —I think that I have heard some of the rumours that Senator Reid raised about there being a suggestion that officers of the Transport Workers Union have a certain view in relation not only to employees in the Commonwealth service but also those who are self-employed in the hire car business in Canberra. Neither the Minister nor the Department has any knowledge of these matters. However, I will refer the question to the Minister and see whether he wishes to respond further. Senator AULICH —My question is directed to the Minister Assisting the Prime Minister on the Status of Women. Is the Minister aware of the Leader of the Opposition's extraordinary claims that the 1 July tax cuts will be of no benefit to women in the community? Can the Minister comment on the real benefits that women in this community have gained through the Government's tax reform package? Senator RYAN —I am aware of the extraordinarily dishonest and misleading claims which have been made by the Leader of the Opposition in relation to the effect of the tax cuts. Senator Chaney —On a point of order: I object to the description `dishonest' in relation to those claims. The question in fact was dishonest, but it mixed up several things, those being the total tax package and the 1 July tax cuts, which, the Leader of the Opposition said, would not benefit many millions of Australian taxpayers. I ask you, Mr President, to call the Minister to order and to insist that she answer the question, in terms of accuracy and not otherwise. The PRESIDENT —There is no point of order. Senator RYAN —The facts are that the 1 July tax cuts represent a deferral of part of the Government's tax package, a deferral that higher income earners were asked to bear in the context of last year's Budget. The first round of these cuts which came into effect on 1 December was of the greatest advantage to low income earners, and particularly to women. The increase in the tax-free threshold from $4,595 to $5,100 assisted 130,000 people who became exempt from tax as a result of that increase. Women, who receive 77 per cent of social security payments, were the major beneficiaries of that tax reform. Some 40 per cent of women in the work force work part time and earn less than $10,000 per annum and, as a result of the tax reform package, they paid 13 per cent less tax. Women earning average weekly earnings received an additional $5.20 per week through tax relief. This, together with the effective flat tax cuts of $7.60 per week that this Government put into place in November 1984, has meant that women have seen substantial increases in disposable income as a result of amendments to the tax system. Finally, and very specifically-this relates to the issue that Senator Chaney tried to take a point of order about-the July arrangement has benefited many women. Mr Howard said that it would be of no benefit to women, and this just shows how the Liberal Party of Australia thinks. Mr Howard has conveniently forgotten the poverty trap measures; he has conveniently forgotten the many thousands of women in receipt of pensions and benefits who will be advantaged greatly by the poverty trap provisions which come into place on 1 July. This will mean that single and married pensioners will be able to earn an additional $10 and $20 respectively before their pension begins to reduce. It is quite clear that those people particularly, of whom a large majority are women, will benefit specifically from the poverty trap measures, which is a fact that has been overlooked completely and which has been neglected by Mr Howard, who only ever looks at the rich when he thinks about tax changes. Senator LEWIS —My question is directed to the Minister for Veterans' Affairs both in that capacity and as Minister representing the Minister for Territories. Is the Minister aware that the offer he is making to visiting medical officers in repatriation hospitals in his role as Minister for Veterans' Affairs would represent, if it were granted to doctors in Australian Capital Territory public hospitals, an annual cost of $6.9m, which is more than the doctors are prepared to settle for? Why is the Minister for Territories not prepared or not allowed to offer the Australian Capital Territory doctors the same amount of money for their services as the Minister for Veterans' Affairs is prepared to offer repatriation doctors? Senator GIETZELT —The attitude that the Minister for Territories takes is entirely one for him to decide. I have a legislative obligation under the Repatriation Act to provide treatment in repatriation hospitals. Therefore, if the Australian community is of the view that there is an obligation on the part of governments and the community to recognise that fact, then I am entitled to avoid, and I accept the responsibility to avoid, the sort of situation that has developed in one or two of my repatriation hospitals as a result of a claim by the Australian Medical Association, on behalf of visiting medical officers, for the establishment of a scale of fees that is commensurate with the fees paid in the State hospital system, which vary from State to State. As I have said here in response to questions asked from time to time by both Opposition and Government senators, the Government's position is in unison with the positions of the State Ministers for Health. We have offered matching rates, whatever the State hospital system was prepared to offer, for sessional fees in the respective States. I have indicated that I am prepared to offer the same amount in respect of those hospitals regardless of the political complexion of the Minister for Health in each State. To that extent, I have the support of the National Party Minister for Health in Queensland, Mr Ahern, and the Liberal Party Minister for Health in Tasmania, Mr Groom, as well as the support of Dr Cornwall in respect of Daw Park in that State. I believe that the Government's approach to this issue is fair and equitable, even though varying rates are paid to visiting medical officers in every State of the Commonwealth. In those circumstances, one can, in a certain philosophical sense, say that there should be a universal rate, but we do not have universal rates for service salaries or wages in respect of any awards throughout Australia. This is probably something that, in the fullness of time, will develop. In the current circumstances, I have negotiated with the Australian Medical Association a scale of fees that is higher in New South Wales than in Western Australia or South Australia, because the rates of pay in those States vary. Of course, that is the approach that the Commonwealth is taking in respect of its obligations to veterans, who comprise a special group and who have treatment entitlements under the Veterans' Entitlements Act, which this Parliament approved. What the Minister for Territories does in respect of pay rates in the Australian Capital Territory is a matter outside my specific jurisdiction. I do not intend, and neither does the Government, to be in a bargaining or an option situation whereby one State would be treated differently from other States if there were to be a detrimental effect to veterans. In that regard I have the support of the Returned Services League. I refer to what Sir William Keys said to Dr Pickering from the Australian Medical Association. He said: Now that an agreed compromise has been reached in all States except Queensland and South Australia, the RSL is disappointed that the AMA has resorted to industrial action in these States. The RSL understands the doctors' wish to be fairly remunerated for their special skills and responsibilities. He points out that during this time of economic restraint the Government cannot meet all the demands made upon it. I also have another statement, in which Dr Jennings, in South Australia, says: I never thought I would see the bloody day come when doctors would turn away an 80-year-old veteran with a broken leg from a hospital. He was referring to the fact that doctors in South Australia are refusing to treat veterans unless they are on emergency services. I also have a letter of commendation of the Minister and the Government, and condemnation of the doctors, from the Legacy Co-ordinating Council of Australia. The Government's attitude in respect of this very vexed problem, and very acute problem as it affects many thousands of veterans in our repatriation hospitals, is that it hopes that the doctors would not see salaries or incomes as being more important than looking after the medical health of veterans. Senator LEWIS —By way of a supplementary question, Mr President, will the Minister confirm that, in effect, he is saying that the Government is prepared to pay doctors in New South Wales repatriation hospitals-- Senator Elstob —We are prepared to give ex-servicemen a fair go; that is what we want to do. It is more than you will ever do. Senator LEWIS —I know that the Minister has difficulty with his hearing; I am trying to make sure that he does hear the question. I ask the Minister: Is he saying to the Senate that the Government is prepared to pay repatriation doctors in New South Wales more than it is prepared to pay Australian Capital Territory doctors? Senator Walsh —It is a different system. Senator LEWIS —It does not matter whether it is a different situation or not. The simple question is whether that is what the Minister is saying. Senator GIETZELT —What I am saying is that the Government's position is that it is prepared to match the rates paid to doctors in the State systems, and it is not prepared to depart from that. Senator Walters —Are you prepared to pay politicians in New South Wales a different rate? Senator GIETZELT —Senator Walters is talking about it because she has a pecuniary interest in the matter, as her husband happens to be a doctor. Senator BOLKUS —My question is to the Minister representing the Minister for Employment and Industrial Relations as well as the Treasurer. I refer to an article in this morning's Australian by so-called commentator, David Potts, headed `Rising wages blow Government's Budget forecast cover'. Can the Minister provide any clarification on an assertion contained in the article by Mr Potts that wages have grown by 6.7 per cent in the year to the March quarter, as compared with a Budget forecast of 6.25 per cent? Senator WALSH —I have seen the article in question and it is wrong on a number of points, although I accept that Mr Potts got it wrong probably by accident whereas of course some other people, like McLachlan, the ratbag Right in general and the Liberal Party of Australia, generally get things wrong by design, as demonstrated by their advertisements and assertions. The accounts show that it is correct that for the March quarter wages, salaries and supplements grew by 6.7 per cent, but that is the aggregate payment and as such does not take into account the increased number of employees. In other words, the 6.7 per cent is not the figure for increases in wages, salaries and supplements per employee. It is derived partly from the increase in those payments per employee and partly from the growth in the number of employees. As we know, there has been extremely strong growth, particularly in recent months, in employment, maintaining the trend established by this Government since its first couple of months in office. Total employment has grown by more than 150,000 per year. The most recent figure that I can remember is that there are now 768,000 more people in jobs than there were in April 1983. That is in contrast, if I may say so, with the record of the previous Liberal Government. The recession over which Mr Howard presided destroyed in only one year a quarter of a million jobs, while in 4 1/2 years this Government has created an additional three-quarters of a million jobs. In particular, for the March quarter growth in earnings on a national accounts basis amounted to only half a per cent-a very major decline on figures recorded for the last quarter or two of 1986. More importantly perhaps, non-farm real unit labour costs fell by 1.1 per cent in the quarter. Real unit labour costs are not, of course, the same measure as nominal increases in wages and salaries. Real unit labour costs fell by 2.1 per cent over the year to the March quarter 1987, continuing the trend which once again has been evident throughout the lifetime of this Government. Real unit labour costs have fallen, again in stark contrast with the record of the previous Government in its final few years. Senator Sir JOHN CARRICK —My question is directed to the Acting Minister for Foreign Affairs and concerns the recent military coup in Fiji. I ask: Did the Government have any prior knowledge of the likelihood of or pre-planning of the coup? Did the Government or any of its officials have any discussions with any other government, including the New Zealand Government, on this matter prior to the coup? In determining its current position on the Fiji situation, did the Government conclude that the Fijian Governor-General possessed the constitutional power to dissolve the Bavadra Government? If so, on what grounds was the dissolution legal? Finally, if the Government does not consider that the dissolution was constitutional, what is the current situation in Fiji and what government or authority does the Hawke Government recognise as either the de jure or de facto government of Fiji? Senator GARETH EVANS —There was no prior knowledge in the Australian Government as to the circumstances which resulted in the coup or any knowledge of the coup itself. Nor, accordingly, was there any prior discussion with New Zealand about such course of events before they occurred. There has, of course, been a great deal of discussion since. As to the questions of the legal capacity of the Governor-General to dissolve the Parliament without the actual advice of Dr Bavadra, they are, as Senator Sir John Carrick should be aware from Press reports at least, matters which are being litigated now within the Fijian court system by Dr Bavadra and his Ministers. I do not think it would be at all appropriate under those circumstances for me to comment further, even if it were appropriate under Standing Orders to comment on a question involving so manifestly one of legal advice. As we have acknowledged in public statements, there is an element of constitutional continuity, and certainly some greater element, in comparative terms, of constitutional propriety involved in the Governor-General exercising his authority as he did to declare a state of emergency and to accomplish certain results in the purported exercise of his gubernatorial power. However, whether that is such as to constitute a completely legal course of events in every sense of that term under the proper construction of the Fijian Constitution is something we reserve judgment on. As to the question of Australia's recognition of the present Government in Fiji, vested as it is effectively in the person of the Governor-General, we have indicated that our position is one of non-recognition of the Fijian regime or the Fijian Government in the present circumstances. That is likely to remain the case for the foreseeable future, but beyond that I do not think it is appropriate for me to comment further. It is a matter, obviously, for ongoing review by the Government of Australia as the situation unfolds. Many situations could occur. There are many ways in which the situation could unravel in the days and weeks ahead, hopefully, possibly with the assistance of the mission that has been identified by the South Pacific Forum communique or maybe in some other way. In that still rapidly evolving situation I think it would be premature to state any final or decided view by the Government as to what is likely to happen in the future and when. Senator Sir JOHN CARRICK —I ask the Minister a supplementary question: On what standing orders does he rest his reluctance to comment either because there is litigation in another country or because of the situation in this Parliament concerning commenting on another country? On what possible standing order does he rest? Senator GARETH EVANS —Whether it is an opinion about the constitutional law of Fiji or the tort law of outer Mongolia it is still a legal opinion, and Standing Orders prohibit me from offering one. Senator RICHARDSON —Has the Minister for Industry, Technology and Commerce seen a Press release from Senator Messner, dated 28 May, claiming that the car industry is being destroyed by the Government's harsh economic and taxation policies? What is the Minister's view on the health and future of the motor vehicle industry in Australia? How have Government policies contributed to its development? Senator BUTTON —I guess we have been through this sort of question before in the Senate. Senator Messner, who is now the Opposition spokesman on industry, and the Opposition spokesman on Treasury matters, whose name temporarily eludes me, have always used the barometer of monthly market figures for the motor vehicle industry as a gauge to the basic health of the industry in this country. Senator Messner put out a Press release last week, which contained the following statement. In relation to the fringe benefits tax at this point he said: At stake is the complete viability of a vibrant car industry . . . and further job losses for many thousands of workers. Only when the fringe benefits tax is abolished and interest rates are significantly reduced will these disastrous trends be reversed. And this will only eventuate under the policies of a Howard Government. That is pretty cold comfort for the motor vehicle industry, if that is true by way of analysis, because it would have to face up to a very long and gloomy future before those things would be alleviated by a Howard government. Senator Messner has been a shadow Minister long enough to know by now that the motor vehicle industry in this country is potentially more viable than it has been for many, many years. That is reflected in investment, export performance and so on. There is no industry in this country-the motor industry is no exception-of a significant kind which can go on satisfying a domestic market only, which is what Senator Messner sees as its role. This Opposition has learnt nothing in the last 10 years. If we relied on domestic market figures purely, no industry could have a very bright future. Senator MacGibbon —They are all going broke. Senator BUTTON —Let me give the Opposition a few facts which might help it to put out another Press release. It is true, as has been said on numerous occasions, that registrations of motor vehicles are down due to the effect of the devaluation. Very significant structural changes are occurring in the industry. Only on 29 May Nissan Motor Co. (Australia) Pty Ltd announced that it would spend a very significant sum of money in investment in Australia's local production over the next five years and would build a joint venture 4-cylinder car with Ford Motor Co. of Australia Ltd for export to Japan. The Nissan Motor Co. in Japan will make that investment. The conclusion of the Nissan Motor Company's Press release said: This is a vote of confidence in the future of the Australian vehicle manufacturing industry. One can also look at a company such as Ford which has invested $920m over the past four years to design and build a Falcon replacement and a new Laser-based sports car which will be exported to the United States of America. General Motors-Holden's is spending some $300m preparing the Commodore replacement, moving away from a reliance on overseas design expertise for its cars and using an Australian engine. Toyota Manufacturing Australia Ltd has spent $15m revamping its Melbourne manufacturing operations recently. Whatever Senator Messner thinks, these are not the signs of an industry which threatens its workers with further job losses. The Nissan announcement has said that 800 more workers will be taken on by Nissan; there will not be a reduction in jobs. The job losses to which Senator Messner refers are stuck in his head from when the Opposition was in government because in the last year of the Fraser Government thousands of motor vehicle industry workers lost their jobs; they were thrown out in dollops of thousands. That has not happened since this Government has been in power, and it will not happen in either this or any other industry. Senator MESSNER —I refer the Minister for Industry, Technology and Commerce to the Customs Tariff Amendment Bill 1987, which has been introduced in order to implement the international agreement for a new harmonised tariff. While the Opposition supports that legislation, I ask the Minister to indicate how many companies have expressed concern at significant cost disadvantages which will arise in instances where existing tariff rates will be raised as a result of restructuring to accommodate the harmonised system. Will the Minister further indicate whether the Government intends to respond positively to such representations that have been received and to seek to ensure that the cost structure of Australian industry is not unnecessarily increased by changes in tariff rates to be effected for administrative and tariff structural purposes rather than for protection of the industries concerned? Senator BUTTON —I have seen no representations from companies in respect of accommodating the tariff adjustments which will occur with the introduction of tariff harmonisation. Representations may be floating around. Inevitably, if one makes a significant change to the tariff system, which tariff harmonisation does, there will be-as in all changes-winners and losers, checks and balances and so on. There will be some beneficiaries and some people who do not benefit. Maybe there will be complaints about that. If I get any such representations I will, of course, reply to them. Senator REYNOLDS —I address my question to the Special Minister of State. In view of the Queensland Government's announced inquiry into the Four Corners allegations about organised crime, is the Minister aware of ongoing criticism that the terms of reference are inadequate to investigate fully the extent of corruption in Queensland? Will it be necessary for the National Crime Authority also to investigate these serious allegations? Senator TATE —I have had drawn to my attention the terms of reference for an inquiry into many of the allegations which were raised on the Four Corners program concerning criminal activity and corruption of police forces in the jurisdiction of Queensland and in Brisbane in particular. Those terms of reference were announced by Mr Bill Gunn, the Deputy Premier, on 2 May. There has been universal reaction, certainly in the Queensland Press that I have been able to review, to the effect that the terms of reference are far too narrowly drawn as to both the time and the scope of the matters which should be inquired into by the commission of inquiry. The editorial of the Townsville Bulletin of Saturday, 30 May states: The Queensland Government has done itself, the State's police force and the public a disservice by limiting the terms of reference of the commission of inquiry into allegations of police corruption. It continues: There is no legitimate reason to limit the inquiry to just those five people- who are named in the terms of reference- nor to limit it to events of the past five years. That is the point. It would be absurd to think that the matters raised and the allegations canvassed in that program erupted in the five years that this inquiry will look into. The scope should have been somewhat wider. If there is any saving grace in the setting up of this inquiry it lies in the appointment of Mr Fitzgerald, QC, to head it. Mr Fitzgerald, a very eminent Queen's Counsel, was formerly a judge of the Federal Court of Australia. There can be no suggestion whatsoever that he will bring anything but the highest integrity to the task that he has been given but, of course, his inquiry is to be conducted within those restricted terms of reference. Mr Gunn indicated at the time of announcing the terms of reference that Mr Fitzgerald will be entitled to approach the Government at any time to seek an extension of the terms of reference. It is within that indication by Mr Gunn-and I am sure it is sincerely given-that the Queensland Government would react favourably to any such application by Mr Fitzgerald to extend the terms of reference that there is any sense of consolation at all when one looks at the setting up of this inquiry. Mr Fitzgerald, I suspect, will find the terms of reference somewhat restrictive. It is to be hoped that his application to the Queensland Government to seek an extension of those terms will receive due and proper publicity, as is the case with the National Crime Authority when it seeks a reference, so that we will know whether that Government is prepared to give the reference as required. As for the National Crime Authority, it will be known to honourable senators that the Authority, using its general investigative powers, can investigate of its own volition and without seeking the approval of any government any relevant criminal activity of a serious kind, many of which were embraced by the Four Corners program. In respect of the Authority's coercive powers, it has a pre-existing reference from both the Commonwealth and Queensland governments which touches upon some of the matters raised in the Four Corners program. The Queensland inquiry will in no way displace the investigations being undertaken under that term of reference. The National Crime Authority will continue its own investigations and, I believe, may even talk to the inquiry once it is fully established. I think that with the activity of the Queensland Government, supplemented by the National Crime Authority, we now have a sufficient basis for the commencement of an unravelling of the allegations made on the Four Corners program. Insofar as the terms of reference prove insufficient, I am sure that Mr Fitzgerald will apply for an extension, and the National Crime Authority retains its plenary powers to carry out its own investigations. Senator WALTERS(Tasmania) —I seek leave to make a personal explanation. Leave granted. Senator WALTERS —Senator Gietzelt should be careful about whom he takes on in this place. He has accused me of interjecting because of personal interest. Senator Gietzelt —If you intervene, you get back what you give. Senator WALTERS —I would like Senator Gietzelt to listen very carefully. He accused me of interjecting because of personal interest in the present confrontation between him and the doctors of the Repatriation General Hospital, Hobart. The Minister's refusal to pay doctors at the repatriation hospital in Hobart the same as he pays doctors at the repatriation hospital in Sydney-and he does not suggest that the Government should not pay Federal politicians the same as politicians in Sydney are paid-is unjust. The PRESIDENT —Order! Senator Walters, this should be a personal explanation, not a statement. Senator WALTERS —I am indicating the injustice of the position. My husband, who has worked at the repatriation hospital for many years, is working in a completely honorary capacity. He has never refused to see or to treat a patient. He is working for nothing during this confrontation resulting from the Minister not paying Hobart doctors the same as those in Sydney. My husband has spent 15 years working in an honorary capacity at the Royal Hobart Hospital. He is now working during the confrontation in an honorary capacity. It is a disgrace that this Government, with this typical doctor bashing, carries on in such a fashion by picking on Hobart doctors who are working in an honorary capacity because the Minister refuses to give them justice. Senator TATE —In answer to a question from Senator Crowley earlier in Question Time I used my memory to indicate the number of medical services that each Australian used on average in two different years. I now give the figures that I have found in my brief. If yearly statistics are compared it can be seen that in 1983, the last full calendar year of the final Fraser Government health scheme, each Australian used an average of 7.7 medical services. In the 1986 calendar year the average was 7.68-an almost identical utilisation rate. Senator TEAGUE(South Australia) —I seek leave to make a personal explanation. Leave granted. Senator TEAGUE —On Friday I referred to a letter sent to the Minister for Education (Senator Ryan) on 19 May by the Chairman of the National Catholic Education Commission, Sir Bernard Callinan. I seek leave of the Senate to incorporate the letter in Hansard. Leave granted. The letter read as follows- NATIONAL CATHOLIC EDUCATION COMMISSION G.P.O. BOX 173 CANBERRA A.C.T. 2601 TELEX AA CEOCAN 62448 PHONE (062) 47 2606 Ref. BC-5/87-379 May 19, 1987 Senator the Honourable Susan Ryan, Minister for Education, Parliament House, CANBERRA 2600 Dear Minister I have written to the Prime Minister to express the appreciation of the National Catholic Education Commission for the Government's decision in the May Economic Statement to leave untouched funding levels for Commonwealth programs for schools. As I pointed out to the Prime Minister, my Commission is aware of the need for fiscal discipline and restraint during this time of economic difficulty for our country. It is also aware of your efforts, and those of the Prime Minister, to give the highest priority to the welfare and development of Australia's children through formal educational processes. We appreciate your understanding of the importance of Commonwealth programs for children in Catholic schools which continue to operate at comparatively low resource levels. We further appreciate the Government's decisions not to reduce Commonwealth funding levels for any schools since this supports the right, which my Commission advocates, that all children should share equitably in the public expenditure on education irrespective of the school chosen by their parents. I am enclosing, for your information, copies of the Commission's recently revised School Funding Policy. B. Callinan Chairman Senator TEAGUE —I thank the Senate. When the Minister quoted from this letter in Senate Question Time on Friday, I asked her to table it. She declined to do so, but has agreed to do so today. I now cite page 3253 of Hansard to quote what the Minister said. She said: . . . the four-year funding scheme is one of the proudest achievements of our Government. I should emphasise that the National Catholic Education Commission appreciates and commends our commitment to that scheme and it has welcomed and endorsed our policies. This is a direct misleading of the Senate because it is false. The Minister quoted from the letter and said this-and it is in Hansard-- Senator Gareth Evans —I raise a point of order, Mr President. Senator Teague is not, on any view as I see it, giving a personal explanation. He is seeking what he claims to be a correction of the record based on a reply to which he wishes to respond. He has other opportunities to do that in Question Time tomorrow. I submit that this is not a personal explanation. The PRESIDENT —Senator Teague, you have begun to debate the question. If you are making a personal explanation, I ask you to limit your remarks to that. Senator TEAGUE —The Government is certainly touchy about this matter because the Minister, Senator Ryan, has misled the Senate. I come to my personal explanation. The citing of the quotation that is in Hansard is not in the same words as those in the letter that I have now incorporated. I personally asked questions and outside it has been said that I have badgered this Minister on this matter, because it is in the face of all the commitments to the National Catholic Education Commission-- The PRESIDENT —Order! This is not a personal explanation, Senator Teague. Senator TEAGUE —I am finishing my remarks, Mr President. The PRESIDENT —It has to be a personal explanation. Senator TEAGUE —I point out to the Senate that my contest on Friday was correct-- Senator Gareth Evans —I rise on a point of order, Mr President. Senator Teague is manifestly denying your authority and is manifestly carrying on in contempt of the chamber and the Chair. With respect, Mr President, you should sit him down. The PRESIDENT —Senator Teague, your remarks must relate to a personal explanation. I ask you to bring your remarks to a conclusion. If you will not do so, I will sit you down. Senator TEAGUE —On Friday the Minister was reflecting on my right to ask her to table a letter from which she was quoting-in fact, incorrectly-and I want to maintain and explain to the Senate that I was fully within my rights- The PRESIDENT —Order! Senator Teague, you are out of order. You must resume your seat. Restoration to Notice Paper Motion (by Senator Gareth Evans) put: That the second reading of the Broadcasting Amendment Bill 1986 be an Order of the Day for the next day of sitting. The Senate divided. (The President-Senator the Hon. Kerry Sibraa) Ayes . . . . . . . . . . . 37 Noes . . . . . . . . . . . 34 —— Majority . . . . . . . . . 3 —— Aulich, T. Gietzelt, A. T.Bjelke-Petersen, F. I. Giles, P. J.Black, J. R. Harradine, B.Bolkus, N. Jones, G. N.Boswell, R. L. D. McIntosh , G. D. (Teller)Brownhill, D. G. C. McKiernan, J. P.Button, J. N. Maguire, G. R.Childs, B. K. Morris, J.Coates, J. Ray, RobertColeman, R. N. Reynolds, M.Collard, S. J. Richardson, G. F.Colston, M. A. Ryan, S. M.Cook, P. F. S. Sheil, G.Cooney, B. Sibraa, K. W.Crowley, R. A. Tate, M. C.Devlin, R. Walsh, P. A.Elstob, R. C West, P. A.Evans, Gareth Zakharov, A. O.Foreman, D. J. Alston, R. K. R. Messner, A. J.Archer, B. R. Newman, J. M.Baume, Michael Parer, W. R.Baume, Peter Powell, J. F.Carrick, Sir John Puplick, C. J. G.Chaney, F. M. Reid, M. E. (Teller)Durack, P. D. Sanders, N. K.Georges, G. Short, J. R.Guilfoyle, Dame Margaret Siddons, J. R.Haines, J. Teague, B. C.Hamer, D. J. Townley, M.Jessop, D. S. Vallentine, J.Kilgariff, B. F. Vanstone, A. E.Knowles, S. C. Vigor, D. B.Lewis, A. W. R. Walters, M. S.MacGibbon, D. J. Watson, J. O. W.Macklin, M. J. Withers, R. G. Robertson, E. A. Mason, C. V. J. (Senator Hill did not vote, to compensate for the vacancy caused by the resignation of Senator Grimes). Question so resolved in the affirmative. Senator GARETH EVANS(Victoria-Manager of Government Business in the Senate) —by leave-I inform the Senate that, after the consideration of the taxation package today, it is the Government's intention to proceed then in accordance with the Notice Paper rather than with the red Senate order of business sheet, which was printed before these matters were resolved. That is to say, consideration of the taxation package will be followed by the consideration of the education package, order of the day No. 3; which will be followed by the group of July 1 commencement Bills, that is, orders of the day Nos 4 to 7; which will be followed in turn by the group of miscellaneous urgent Bills, orders of the day Nos 15 to 18. Debate resumed from 29 May, on motion by Senator Gareth Evans: That the Bills be now read a second time. upon which Senator Short had moved by way of amendment: At end of motion, add ``, but the Senate- (1) condemns the Hawke Labor Government for raising the company tax rate from 46 per cent to 49 per cent at a time when company tax rates around the world are being lowered; (2) notes that the Government's so called `tax reform' proposals have imposed an additional tax burden on business in excess of $2,000 million; (3) notes that these new business taxes have been imposed at a time when the level of business investment in this country has fallen to an appallingly low level and there is a rising tide of bankruptcies; (4) notes with concern that the interaction of the proposals in the Taxation Laws Amendment (Company Distributions) Bill 1987 with the foreign tax credit system and the new capital gains tax imposes a tax disadvantage on companies and on their shareholders; (5) notes that the Taxation Laws Amendment (Company Distributions) Bill 1987 also contains unnecessarily complex administrative and compliance procedures for companies, and therefore, (6) calls upon the Government to restore the incentive to invest by pursuing a more balanced economic policy and reducing the taxation and administrative burden on business''. Senator WATSON(Tasmania)(3.22) —The Senate is continuing its debate on a package of five allied and two cognate Bills dealing with taxation. One of the principal features of this package is the introduction of a system of dividend imputation. Of some concern to the Senate must be the increased investigatory powers of the Commissioner of Taxation. These increased investigatory powers, and their extension to pay as you earn provisions, whilst they may on the surface appear to be quite reasonable, open avenues by which civil liberties of honest people may be infringed by over-zealous inspectors. The amendments, for example, will require taxpayers to give assistance to Australian Taxation Office investigators, rather than allowing just a right of access. This package of Bills will also give effect to a decision which was first announced in September 1985 and which has been significantly revised since that date. In essence, these new arrangements will operate so that tax paid at the company level will, if certain provisions are met, be credited to the shareholder. While this appears superficially attractive, I believe there are a number of unsatisfactory features of this legislation. First of all, the Bills have the potential to cause significant shifts in investment patterns as shareholders relocate their interests into companies distributing more tax credits as dividends. In fact I believe that institutional borrowers and Commonwealth loan raising facilities will be the biggest losers. Extra burdens will also be placed on companies through increases in the company tax rate from 46 per cent to 49 per cent. The legislation will also cause additional administrative costs to companies. The Bill also discriminates against companies which have shown the confidence to retain Australia as their base and have expanded their operations overseas in an attempt to win more overseas capital. So those companies that have shown this confidence to retain Australia as their base, and have expanded overseas, will, I believe, be disadvantaged by these proposals. These are the organisations that have learnt to operate successfully in a deregulated and extremely competitive environment. They will be penalised, and that is unfortunate. The interaction of the new imputation regulations with the foreign tax credits system will result in overseas investment becoming less desirable as far as Australian companies are concerned. I believe that this is another unfortunate result of the package. In fact, under the foreign tax credits system, companies with operations in the United Kingdom will have to pay tax at their rate of 35 per cent and, when they repatriate the profits from their off-shore operations to Australia, will be required to pay additional tax to cover the shortfall between the tax paid in the United Kingdom and the new Australian rate of 49 per cent. In this case, the extra tax would be 14 per cent. Under these regulations franking credits will accrue only on the 14 per cent paid in Australia and, therefore, the imputation credits flowing to shareholders will be considerably diminished. Much of the benefits of the indexation of capital gains will be lost when the capital gains are distributed in full as a dividend. In other words, that dividend will not be fully franked. The Bill is full of inconsistencies in relation to its treatment of trusts in a loss situation compared with companies distributing losses through partnerships and other companies. The Bill perpetuates a tendency that has become obvious over the past five years to include increasingly complex formulae in our taxation laws. The laws should be simplified. Claims about the benefits that will accrue to shareholders under imputation have been misleading in some cases. Just how tax-free the dividends will be will depend on the tax strategy of each individual company and their often complex domestic and international operations. In fact, the encouragement to pay more franked dividends and thus attract a greater shareholder interest could have the effect of draining new companies of capital. Such a situation will tend to favour established companies at the cost of new companies which require a cash flow, which is so important to be reinvested in order to establish themselves in the market. While this legislation has some redeeming features, it has a lot of inconsistencies and a lot of problems which will manifest themselves in years to come. Senator PUPLICK(New South Wales)(3.27) —I address my remarks to the part of Taxation Laws Amendment Bill (No. 2) 1987 which deals with investment in the Australian film industry. Senator Sanders —Please don't. Senator PUPLICK —I know from the interjection by Senator Sanders that he is not in the least bit interested in the Australian film industry and would not want to assist the industry. That is perfectly understandable as far as Senator Sanders is concerned. Nevertheless, the provisions contained in this Bill introduce changes in the nature of films that may be excluded from the taxation concession regime by the Minister for Arts, Heritage and Environment. In particular, the amendments which are being made to section 124zaa of the principal Act allow the Minister now to exclude from the concessions those films that have `a significant non-Australian content'. Those are the actual words in the legislation. The amendment provides: Where the Minister is satisfied that: (a) a proposed film, when completed, will have a significant non-Australian content; or (b) a film has a significant non-Australian content; the Minister may treat the proposed film or film as not being a qualifying Australian film for the purposes of this Division. The Minister has proposed these amendments as a result of the long running saga over a film entitled The Return of Captain Invincible. This film, which was a monumental box office failure, was made in Australia some years ago. In fact, this saga goes so far back that the Hon. Ian Wilson was the Minister who issued the preliminary certificate for this film to be commenced under the old 150/50 tax regime. The film was subsequently taken to the United States, which was always intended to be the principal market for distribution. In the United States it was cut substantially-virtually reconstructed. You will know, Mr Deputy President, as any senator with your knowledge of the film industry will know, that a film may be substantially altered after being shot depending on the way it is edited. This film was reconstructed in the United States. When the final version was presented for the Minister's completion certificate, a certificate was refused on the basis that the film was not the same sort of film as the Minister had originally intended. The matter then proceeded through the courts. It was heard first by a single judge of the Federal Court, who held that there had been a failure on the part of the Minister to render natural justice to the film producers and that the Minister's decision to refuse the taxation concessions should be overturned. That matter went on appeal to the Full Bench of the Federal Court, which upheld the judgment of the judge in the first instance. It is interesting that when I pressed the officers from the Department of Arts, Heritage and Environment during the last Estimates committee hearings, which were concluded only a couple of weeks ago, it transpired that sums of money are still outstanding in relation to the legal costs of all parties following the conclusion of the legal proceedings in this case. In other words, due to the incompetence of the Department, in large part, and of the legal authorities of the Commonwealth, and despite the fact that this saga has been going on in the courts for more than four years and relates to an eminently forgettable film, although having Alan Arkin and Christopher Lee in its cast, this matter still continues. Therefore, the Government has decided that it will change the Act so that the Minister will have the capacity to refuse to authorise the taxation concession by withholding his final certificate from a film if it has what the second reading speech describes as a significant non-Australian content. The second reading speech states, in part: The Government does not believe that the tax concessions for investments in Australian films should be available where creative control is in non-Australian hands, even though the shooting of the film and other activities may take place in Australia. That is a particularly curious addition to the Act. When one considers that in many instances the reconstruction of a film by editors that takes place outside Australia may be quite integral to the financial viability of the project, it is an unfortunate addition to the Act. Briefly, some of the most successful Australian films, such as the Mad Max films, have undergone reconstruction and editing to make them more suitable for particular markets. For instance, the Japanese versions of those films have differed in significant measure from the films shown in Australia. Major changes have been made, and such changes are always made, in terms of the dubbing of scripts in the United States. In fact, many Australian films are released in the United States with a voice-over track dubbed by Americans because, allegedly, Americans have some difficulty with Australian accents in some Australian films. We know it was indicated that the film Malcolm, which was an outstanding success in Australia, would not be released in Singapore unless it was reconstructed with an ending different from that shown in the Australian film in order to comply with the moral standards of Singapore, where it must be asserted in all instances that crime does not pay. The end moral of the film Malcolm was that certain types of crime do pay and, indeed, under certain circumstances ought to pay. Therefore, if that film was to be shown in Singapore it had to be reconstructed. It is very difficult to expect Australian films to compete on international markets if from time to time they must be altered for different foreign markets to increase their financial viability and if the Minister subsequently says: `I think it has gone too far. I will exercise my judgment as to what constitutes significant non-Australian content'. There are really no sound definitions in the Taxation Laws Amendment Bill (No. 2) 1987 of what constitutes significant non-Australian content. It therefore puts the Minister in a position of making, in essence, a judgment, which is not a judgment of fact but one of opinion. As I have indicated, the Minister in his second reading speech concedes that the shooting of a film and other activities may take place in Australia but if there is some degree of creative control in non-Australian hands then the Minister may exercise a judgment not to allow the taxation concession to be paid. I think that that is an unfortunate development in terms of Government financial support for the Australian film industry. This is not to say that some of the other steps taken by the Government to provide financial support for the film industry have not been without their critics. As you would know, Mr Deputy President, the original regime introduced by Mr Ellicott when he was the Minister for Home Affairs in the time of the Fraser Government provided for a taxation concession of 150 per cent of the investment and for a 50 per cent relief on the profits made from the film. That has been gradually whittled down from 150-50 initially to 133-33 and subsequently by this Government to 120-20. In itself that occasioned a fair amount of criticism. A number of people have drawn attention to the fact that this now increases the necessity for films to achieve pre-sale in order to establish the sort of viability which will attract investors. It is certainly true that some time ago criticism was made that this might have an adverse impact on the quality of Australian films that are made. I did not support that point of view at any stage. Indeed, there are grounds for saying that a film which requires a greater degree of pre-sale is more likely to be a film of quality and one made by people with a proven capacity and that, as a result, there would be a necessity for young film makers to rely a great deal more on the support which they get from the Australian Film Commission through its Creative Development Branch. I will say something about further funding for the film industry in Australia later. Nevertheless, I think that there are trade-offs in this matter. The lower level of tax write-off has the capacity to increase the quality of Australian films which then in fact do continue to be made. The one thing that I regret is that I think that it will increase the pressure to make films for television rather than for the cinema, and I think that that is an unfortunate development within the industry. However, it was indicated in the May 1986 edition of Encore that at that stage there was still a large amount of money around in terms of potential investment in the film industry, even under the new regime and that in fact what was absent was the number of good scripts and good technicians-not on the creative side but on the technical side-to make quality Australian films. The effect of the Government's changes to the film industry as far as taxation is concerned can be put in these terms, namely, that the effect of the change is really to increase an investor's margin of risk after tax from 20 per cent to 28 per cent, assuming a 60 per cent marginal tax rate and a 100 per cent eligibility. In practice the level of pre-tax return required to breach the after-tax margin of risk will be greater because a proportion of the bridging return will now be taxable. The prima facie effect of the Government's reductions is to put upwards pressure on pre-sale requirements, as I have already said. This will lead to a downturn in the level of fund raising to the extent that such pre-sale requirements are unable to be met and ultimately to a downturn in production activity. The changes to the tax regime, both in terms of the level of personal tax cuts and of the reduction of support for the industry as a whole, have led the Australian Film Commission to develop an alternative. In a paper entitled, `Film Assistance-Future Options', prepared by David Court on behalf of the Australian Film Commission, a series of new proposals has been advanced for the establishment of a loan corporation which will finance films through direct loans made by the Australian Film Commission rather than by the use of the taxation system. It is interesting to note that although this proposal has been around for some time the Government is only now considering it seriously. An article which appeared in today's edition of the Australian quotes Mr Kim Williams, the Chief Executive of the Australian Film Commission, as calling for `the immediate establishment of what he would call the Australian Loan Corporation to ensure that film and television production did not fall to unacceptable levels in the new financial year'. The article reads in part: Speaking on the Channel Ten network's Business Week program, Mr Williams said that film funding next year would fall to a `most worrying level' of just $50m, from between $130m and $150m this year, because of the combined effect of the lower tax deduction and the falls in marginal income tax rates. Investment in the Australian film industry is still extremely worthwhile. The film industry continues to make one of the most significant contributions to creative endeavour in this country. It is a most important and integral part of the projection of Australia overseas. The success of Australian films is very much related to the success the tourism industry has had in attracting tourists and revenue to Australia. I therefore hope that the Government will be able to indicate fairly promptly its response to the Australian Film Commission. As somebody on this side of the chamber who has some very close associations with the development of the film industry I would be, in general, very keen to support-and for the next Liberal Government to support-the proposals put forward by the Film Commission in its discussion paper. I do not agree with all of the specifics put forward, either in the discussion paper or in the supplementary paper on the finance corporation model which the Film Commission released in January this year. Nevertheless, the general thrust of its suggestions should be adopted and borne in mind. I want to say something very briefly about one other minor matter. I will delay the Senate for only a couple of minutes to conclude my remarks. People will have noticed the Government's claims as to the rationale for the double dissolution election. It has resurrected arguments about the Australia Card and its impact on tax, tax evasion and tax fraud. We will have the opportunity in the electorate to discuss this matter at considerable length. People will have seen the advertisements already placed by the Australian Labor Party in the newspapers claiming that the Australia Card is important for the proper administration of the taxation system. The Government is anxious to ensure that there is not full public discussion on this matter. I was in Orange over the weekend. The local newspaper in the area, the Western Advocate, carried a couple of letters in an edition some weeks ago dealing with the Australia Card, the identity card, and the comments made about it by the Labor Party. Mr Brian Davis, Vice-President of the State branch of the Australian Small Business Association, had a letter published in the Western Advocate on 28 January 1987, in which he said, in part: Socialist governments also try and give a plausible excuse-usually a red herring and not associated with the real issue-in order to justify their actions and to not stir up the masses too much. The Hawke socialist party and, particularly our local member, Mr David Simmons, have kept to the socialist tradition and are trying to sell the population hard on their promise that the Australia card will only be used to control tax evasion and social security fraud and for no other purpose. To trust a promise of this Federal Government or of our local member who is indeed a socialist in the true sense of the word is naive to the extreme . . . It is certainly true that one of the arguments the Labor Party has put forward is that the Australia Card will be used only for certain purposes, that it will not be open-ended and that it will be an effective tool against taxation fraud. We know that all of those arguments are false. We know that the Australia Card will not be an effective tool against taxation fraud. Senator Haines, who was one of the members who sat with me and other senators on the Joint Select Committee on an Australia Card, knows that that is correct. We know that the card is an open-ended invitation to a great deal of misuse. It is curious, therefore, that attempts are being made to suppress public debate on this matter. As I understand it, Mr Davis is being sued by Mr Simmons, the local member for what he has said about this matter in an attempt to suppress public debate on an issue which the Government has sought to make absolutely essential to the election campaign on which it has hinged the double dissolution, that is, the rejection by this chamber twice of the Australia Card legislation. It is already running advertisements in the newspapers which are not correct. Claims being made about the Australia Card in those advertisements are not correct. They should be refuted in public debate during the campaign. It is a pity that members of the Australian Labor Party are prepared to resort to the courts to prevent full public discussion of the significant issues taking place. Senator HAINES(South Australia-Leader of the Australian Democrats)(3.48) —The clutch of Bills that we are debating today, the Taxation Laws Amendment (Company Distributions) Bill 1987, the Income Tax (Franking Deficit) Bill 1987, the Income Tax Rates Amendment Bill 1987, the Taxation Laws Amendment Bill (No. 2) 1987, the Bank Account Debits Tax Amendment Bill 1987, the Taxation Laws Amendment Bill (No. 5) 1987, and the Income Tax Amendment Bill 1986, represent the latest instalment of the Government's continuing tax reform program which, in principle, the Australian Democrats have supported, although only after securing some notable amendments. The tax reform program has closed off many of the lurks and perks that, it would appear from some of the contributions in this place in recent days and from some of the statements made outside the House, the Liberal Party would want to see preserved, perks that have advantaged a very privileged sector of the population at the expense of ordinary pay as you earn taxpayers. A classic example is the capital gains tax legislation, which the Liberal Party opposed when it was introduced in this place, despite the fact that it is a considerably weaker capital gains tax than that which applies in the United States and which, apparently, the Liberal Party still opposes to the extent of promising to repeal the legislation. The capital gains tax which the Government introduced, and which we supported because it is part and always has been part of Democrat tax policy, has brought in about $1 billion worth of revenue. That amount of revenue is desperately needed to fund government programs that are beneficial to all Australians and not just to those people who are already well off-the sorts of programs that apparently appeal to the Liberal Party in particular. Without the capital gains tax, for example, the feverish activity on the Australian stock market recently, which has resulted in something like $80,000m being added to the value of Australian stocks, would have largely escaped tax. I cannot understand why we should subscribe to an argument that money earned from capital which is risked should be exempt from tax when we do not put that same argument with regard to income earned when one's health or indeed one's life is risked, as often happens with people who work down mines and on oil rigs, fly planes and so on. We never hear that argument then, and I cannot see why capital should be regarded as so much more sacrosanct than life or health that the money earned from it when it is risked ought to be exempt from taxation. The major Bill in this package, the Taxation Laws Amendment (Company Distributions) Bill 1987, or what is generally known around this place at least as the imputation legislation, introduces a full imputation system of company taxation. That legislation will not only impose a fairer system of taxation; it will also increase the attractiveness of equity financing, as distinct from debt financing, of company activities in Australia. The recent increased reliance on debt financing has resulted not only in a dangerous escalation of company gearing but also in a great leakage of revenue which, as I said earlier, is desperately needed in this country if we are to provide the sorts of services that over 16 million Australians of all ages in all walks of life and in all socio-economic sectors need and deserve. The large borrowings of overseas funds for the financing of company activity, particularly negatively geared takeovers, which I have mentioned before almost ad nauseam in this place, have resulted in a fall in taxable company income as a result of debt being claimed as a business expense without the interest payments on those borrowings bearing Australian tax other than withholding tax. The benefit that people such as John Elliott and other sharp takeover players have derived from the tax deductibility of debt financing has not flowed through to the general population. I have seen no evidence from anywhere to suggest that the spate of negatively geared takeovers that has occurred over the past few years has resulted in the type of restructuring of our productive base which is necessary if we are to trade our way out of the present economic crisis. Those negatively geared takeovers in the main are highly non-productive. There is rarely any increase in employment as a result, and often quite the reverse. To the best of my knowledge there has not been any additional gain in export markets as a consequence of any of these takeovers. Yet the Government is quite prepared to sit back and allow these takeovers to be funded-underwritten, if you like-by the taxpayer through negative gearing. The Democrats have been pressuring the Government for some time now to place a limit on the deductibility of debt in the case of negatively geared takeovers. We have been told by the Government that such a technically difficult amendment is out of the question. I would have thought that anyone looking through the hundreds of pages of recent tax legislation would be forced to believe that technical difficulty had not unduly concerned the Government in other areas of tax reform. In fact, Senator Short, in his contribution to the debate last week, commented on the extraordinary complexity of tax legislation that has been introduced into this country in recent years. That includes the clutch of Bills that we have before us. I fail to see how a government can argue that simple technical difficulty is any justification for allowing the sort of negative gearing of which we have seen so much lately to continue. We are also told that a limit on negatively geared takeovers would be an interference with the market-as if the Government does not already interfere with the market. In fact, the amendment brought in by Taxation Laws Amendment Bill (No. 5), to treat short term redeemable preference shares as a debt, not equity, is an interference with the market. It removes an instrument by which companies in a debt position are able to achieve a tax benefit equal to the benefit available to companies in a profit position. It is amazing that this myth of deregulation and the so-called free market services, despite the clearly demonstrable fact that an advanced economy can operate only with a complex structure of government regulations. It seems to me that what contributes most to this debate is whether the speaker approves of the regulations. The Australian Democrats will be supporting this package of Bills, although we have significant reservations about some aspects of the imputation system and will be moving amendments to the Taxation Laws Amendment Bill (No. 5). The reservations that we have about the imputation legislation relate in particular to certain anomalies which arise through the interaction of this legislation with other aspects of the taxation system. I want to spend a few moments canvassing some of those anomalies. The major one relates to the capital gains tax introduced in Australia some time ago to tax real capital gain. It is important when we are talking about the anomaly within the imputation legislation that we understand that the capital gains tax that was introduced in Australia taxes real capital gains and not nominal gains. In other words, if a person buys an asset for $100-to keep the figures fairly simple, I will use that as an example-and after five years, during which time inflation has been running at around 10 per cent a year, sells that asset for around $160, an increase having accumulated through inflation, there is no liability to pay capital gains tax. The profit of around $60 is not really profit but simply the result of inflation-a nominal gain, not a real gain. If that process had been undertaken by a company rather than a natural person, the company also would not pay capital gains tax. If, however, the company distributed the nominal gain-the $60 or thereabouts-to its shareholders as a dividend, a problem would arise. Because the company had paid no tax on that increase over the previous five years because it was not really income and therefore was not subjected to tax, the dividend distributed to shareholders would carry no tax credits and would be fully taxable in the hands of the shareholder, providing essentially a revenue windfall for the Government. I can only hope that this is what is becoming known around this place as an unintended consequence, because it is a crazy result. I think it is a grossly unfair result. It is unfair, firstly because it imposes a tax in a situation where there has been no real increase in the relevant taxpayers' wealth although, as we are all aware, there has been a nominal increase. Secondly, it runs counter to the indexation principle adopted in the Income Tax Assessment Act. Thirdly, it encourages the ownership of assets by individuals rather than companies, despite the fact that ownership of productive assets and thus the carrying on of business by companies is more conducive to economic growth than the ownership of those assets and the carrying on of those businesses by individuals. Similar anomalies arise in the case of foreign tax credits and depreciation provisions. If, for example, an individual has foreign sourced income on which 49 per cent tax has been paid overseas, under the foreign tax credits legislation no Australian tax is due. If a company receives foreign sourced income on which 49 per cent tax has been paid overseas, the company is not liable, for the same reason, to pay any Australian tax. The foreign tax credit legislation gives a credit for all foreign tax paid. If, however, the company distributes that income to its shareholders by dividend that dividend will bear full Australian tax. I am not suggesting that a tax credit should attach to the nominal capital gain distributed to shareholders nor, as Senator Short seemed to suggest last week, should it attach to the foreign sourced income distributed to shareholders. There should be no tax credit because no Australian tax has been paid. However, to apply full tax to dividends is both unfair and anomalous. It also creates a situation in which, in an effort to avoid the anomalies, artificial arrangements are bound to result. I would have thought that we have seen enough of that in this country to try to avoid it at all costs. As I have said, I hope that this measure is one of the famous unintended consequences mentioned recently by the Treasurer (Mr Keating) in relation to other tax matters and that the Government will see fit to do something about it. The effective imputation on depreciation is, effectively, to nullify the incentive provided by various accelerated depreciation provisions in other taxation legislation. While I acknowledge that in the United States measures such as accelerated depreciation allowances have been abandoned, they have been abandoned only because the top marginal tax rate has been dropped as an offsetting mechanism. Again we are concerned about that element creeping into this legislation. Therefore, the Australian Democrats are concerned that the package of imputation Bills before us fails to address the anomalies to which I have referred and it also fails to contain the anti-avoidance provisions which will have to follow the repeal of Division 7 of the Income Tax Assessment Act. It is no answer to say that the drafting of a mechanism to deal with the anomalies would be difficult. We have suggested to the Treasurer's office one mechanism for getting around the capital gains anomaly which involves the creation of an exempt dividend account. If, for some reason, that solution is not viable, I would appreciate an explanation from the Minister as to why it is not viable or an indication from him that the anomalies to which I have referred will be addressed by the Government in the near future. The Taxation Laws Amendment Bill (No. 5) 1986 was debated before it was referred to the Senate Standing Committee on Finance and Government Operations and at that time I outlined the Democrats' position on that legislation. The majority of the Committee reported that the legislation, insofar as it referred to short term financing arrangements, did not contain any provisions which should not have been reasonably anticipated from the Treasurer's announcement of 7 April 1986. There is increasing concern in many quarters-including the Democrats and the Senate Standing Committee for the Scrutiny of Bills-about this Government's increasing tendency to legislate by Press release. It is neither fair to the Parliament nor fair to the people who are being dealt with under the proposed legislation. I ask the Government, particularly in taxing matters, to consider seriously ceasing that operation or, at the very least, keeping the legislation, when it is introduced, within the realms of what was suggested in the Press release. I do not agree that in this case the legislation, as drafted, is necessarily wider than the terms of that announcement, and those affected by the announcement were entitled to rely on its strict wording. The comment I made a moment ago seems to be the minimum requirement placed on government if it is going to proceed with the exercise of legislating by ministerial announcement. The Democrats will be moving an amendment to the Taxation Laws Amendment (No. 5) Bill and that amendment will be circulated as soon as possible. Essentially the amendment will limit the provisions of this Bill which deal with short term financing arrangements to the effect signalled by the Treasurer's announcement of 7 April 1986. As I have said, that amendment will be circulated as quickly as possible and certainly before we reach the Committee stage. I now turn to the amendment moved last week by Senator Short on behalf of the Opposition. That amendment was merely an attachment to the second reading motion of the package of legislation which does not affect the contents of the legislation in any way, but it is worth while looking at it from the point of view of what it says about the Opposition's attitude to tax laws. It is a long amendment which makes some six points with regard to, presumably, the Opposition's philosophy on tax. The first point condemns the Hawke Labor Government for raising the company tax rate from 46 per cent to 49 per cent at a time when company tax rates around the world are being lowered. I would certainly agree with that statement if there were any evidence at all that the companies concerned were paying anything like the 46 cents in the dollar which, up until now, has been the company tax rate. Statex research studies and tables in a recent Business Review Weekly indicate that tax paid, as a percentage of pre-tax profit, is nothing like 46c in the dollar. In most cases it is nothing like even the lowest marginal tax rate that individual PAYE taxpayers contribute to Consolidated Revenue. For example, tax as a percentage of pre-tax profit paid by News Corp. Ltd was 15.42 per cent, Brierley 13.13 per cent, Elders IXL Limited 10.35 per cent, the Bell Group Ltd 27.04 per cent, Adelaide Steamship Co. Ltd 25.87 per cent and David Jones Limited 10.75 per cent. I would have thought that most individuals in the community would dearly love to be able to pay those levels of taxation but, of course, they cannot pay them because they do not have the sorts of deductions that will get their marginal tax rate down to anything like that level. Faced with that situation the Government has two choices. It can either increase tax in order to increase revenue or it can decrease tax and remove-as has the United States-deductions such as accelerated depreciation allowance. The Government chose the first course presumably because it still believes that in a country such as Australia some industries justifiably benefit from allowances such as the accelerated depreciation allowance. The second part of the amendment notes that the Government's so-called tax reform proposals have imposed an additional tax burden on business in excess of $2 billion. That is hardly surprising, given the low levels of tax many companies have been able to get away with paying in the past and, as a consequence of these proposals, are not able to get away with now. Taxes such as the capital gains tax are a significant improvement in this area. The third part of the amendment notes that these new business taxes have been imposed at a time when the level of business investment in this country has fallen to an appallingly low level and there is a rising tide of bankruptcies. Sometimes I wonder whether business investment in this country has fallen because the Government is gradually taking away a lot of the unnecessary corporate welfare that business has operated on in the past, and that companies are not prepared to invest unless they are almost 100 per cent guaranteed of success in that area-in which case they can hardly claim that they are risking anything, much less their capital. The fourth part of the motion notes with concern that the interaction of the proposals in the Taxation Laws Amendment (Company Distributions) Bill 1987 with the foreign tax credit system and the new capital gains tax imposes a tax disadvantage on companies and on their shareholders. I think I addressed that matter adequately enough in the bulk of my speech without having to refer to it again, except to repeat that I wonder why companies think that they, and only they, should be exempt from paying tax at the level at which ordinary individuals are expected to pay it. The fifth part of the amendment notes: . . . the Taxation Laws Amendment (Company Distributions) Bill 1987 also contains unnecessarily complex administrative and compliance procedures for companies. That is linked with paragraph (6) which calls on the Government: . . . to restore the incentive to invest by pursuing a more balanced economic policy and reducing the taxation and administrative burden on business. I would argue that one of the reasons why this Bill is so complex is that while there are smart lawyers and accountants who are able to rip off the system, to find loopholes, to manipulate the law to suit themselves, the Government has little choice but to close those loopholes. The only way to do that is to introduce some extremely complex amendments, unless one is to scrap the entire taxation system and move towards something which it appears the Premier of Queensland has been suggesting, a 25 per cent flat tax-if by that he means that everybody, individual or company, pays 25 per cent of every dollar they earn from $1 and is not entitled to any deductions at all. If that occurs there will be some companies which will pay a fair amount of tax for the first time in their lives, but somehow I doubt that that is what the Queensland Premier means. I believe the Queensland Premier is talking of a 25 per cent top rate for everybody, in which case some low income earners on, say, less than $23,000 a year will find themselves paying more tax each year than they are paying now; and those companies which are paying, as is Elders IXL Ltd, for example, 10.35c in the dollar, when nominal company tax is 46c in the dollar, will be paying almost half that if the Bjelke-Petersen proposal comes into operation. Those people in the community who are lulled by the simplicity of the Bjelke-Petersen argument into believing that support for the Bjelke-Petersen party will make them better off should think again. They should start by sitting down with last year's tax return and working out how much they did pay. As for the last part of the amendment, that calls upon the Government to restore incentive to invest by pursuing a more balanced economic policy and reducing the taxation and administration burden on business. I would say that basically we would agree with that. But the problem is historically based because of the high rates of protection that have existed in this country for decades, which have led to a welfare mentality in the business community far greater than the welfare mentality in the rest of the community. There are some big, wealthy companies which expect non-means-tested, non-repayable subsidies to shore up some of their subsidiary companies, while they continue to make large profits which, because of the many deductions that now exist in the taxation system, they are able to reduce to the extent where essentially they are paying considerably less tax, and thus making considerably less contribution to Consolidated Revenue than do the vast bulk of individual salary and wage earners. That is an inequity that should be faced by this Government and by whichever government is able to get itself into power after the election of 11 July. Senator BROWNHILL(New South Wales)(4.14) —I fully support the Liberal Party's amendment to the second reading motion on the Taxation Laws Amendment (Company Distributions) Bill and allied Bills. I wish to deal with the imputation aspects of this legislation, which I shall try to explain a little to some of my colleagues who may not know all about it. Currently company dividends are distributed to shareholders and are taxed twice. They are taxed first at the company rate of 46c in the dollar, and then are taxed in the shareholder's hands where the shareholder has to pay tax on the dividend. If the shareholder happens to be in the top marginal rate bracket, he therefore pays 60c in the dollar on top of the company tax that has already been paid. The result is that the shareholder in respect of the original dividend dollar receives only 21.6c. Clearly that is an unreasonable amount to be taxed. The imputation mechanism in respect of the initial dollar divided will impose tax at 49c in the dollar and there will be no further tax. The shareholder will be paying a tax rate of 49c rather than the current 78.4 per cent of the dollar that he or she pays at the moment. Because the tax paid by the company will be imputed, this means that each dividend will have a tax credit attached or attributed to it, which will be called the franked dividend. As a franked letter has the postage prepaid, so a franked dividend has the tax paid. Therefore, when a shareholder gets his dividend, all the tax has already been paid at the top rate of 49c. As of I July that will be the highest personal rate of tax. This all sounds very good, but there are elements that need to be closely examined. I shall elaborate on a few of those elements. Company taxes will be raised just from 46c to 49c in the dollar. This is at a time when companies in Australia are being taxed at a rate higher than companies are taxed in the rest of the world where tax rates are falling. The cost to business in Australia will be $475m. The result will be that some companies will have less profits to distribute in the first place. This is an inconsistent approach involving the raising of company taxes from 46c to 49c in the dollar. Therefore, this legislation, in our opinion, will benefit only a small number of shareholders because only some 15 per cent of shareholders are private individuals. The legislation therefore will disadvantage 85 per cent of all shareholders because of the rise in company tax. Even the 15 per cent who will be receiving the major benefit from the imputed or franked dividend will be receiving a quite small dividend. If these shareholders are paying less than 49c in the dollar and are earning more than $35,000 a year after 1 July, the imputation credits they will receive with dividends will exceed the tax they would need to pay on the franked amount of the dividends. This excess rebate can now be offset against other income, including capital gains, which is as it should be. However, if for some reason a shareholder does not have enough other income against which to offset the excess rebate, he must forfeit it. In other words, he cannot get a refund and cannot offset it against his Medicare levy. This legislation is therefore not a genuine 100 per cent imputation package. Businesses that suffer a loss will lose the advantage of dividend income. Low income earners will be the people who are most adversely affected by having to forfeit the benefit of the excess rebate, and they should at least be allowed to carry forward the unused portion of the franking rebate. The big winners from this legislation will be the people who depend on dividend income as a large proportion of total income. It is evident that the ramifications of this imputation legislation will be anything but simple. To sum up, the National Party believes that the legislation has many good points and that this is a step forward in an attempt to eliminate double taxation. However, there is too much of the Clayton's image about it, because despite popular belief it will benefit only a minority. It half-heartedly attempts to restore tax equity in the shareholder-dividend area. It is riddled with anomalies, some of which are quite blatantly wrong in their impact. A mass of changes and refinements to this legislation will be necessary in the future. As a colleague in the House of Representatives, the honourable member for Parkes (Mr Cobb), said: Imputation Paul Keating-style is like a shiny red apple that when bitten open reveals not just a grub but half a grub and we are left lamenting as to what could have been. In summary, the National Party supports the amendment moved by the Liberal spokesman, Senator Short. Senator SIDDONS(Victoria)(4.21) —We are debating the Taxation Laws Amendment (Company Distributions) Bill 1987 and a number of other taxation measures brought down by the Government, the net effect of which will be to introduce the imputation initiative announced by the Treasurer (Mr Keating) many months ago as part of the original taxation package. I congratulate the Government on this part of the tax package which represents very significant reforms. I would go along with the Treasurer when he claims that the imputation legislation is the most significant taxation reform in the post-war years. There is a certain amount of justification for that claim in the sense that with imputation ordinary Australians will now be attracted to buying shares in Australian public companies. Before, only the very wealthy could buy shares in Australian public companies because shareholders in the highest tax bracket were being taxed effectively at 78.4 per cent. In other words, the wealthy bought shares in Australian companies only for speculative reasons, in the hope that a company would be taken over and the shares would suddenly escalate. No ordinary Australian would buy shares in public companies in this country with the idea of holding those shares as a reasonable investment in the long term. This imputation legislation is a dramatic reform. I give all credit to the Government for introducing it. Many Australians do not realise that dividends from shares in public companies are tax free in the hands of companies. In other words, this imputation legislation does not really affect the big shareholders in Australia-other public companies, the takeover merchants or institutions-because they are not subjected to double taxation on company dividends. Dividends from public companies in the hands of other companies are tax free, but not so for the ordinary Australian. This legislation will have the effect of making the purchase of shares in public companies attractive to ordinary Australians. That means that the capital base from now on will be shared much more broadly; ordinary Australians now will have an incentive to acquire a stake in the prosperity of this country. I congratulate the Government that at the eleventh hour it is still determined to get this piece of legislation through the Senate. This legislation is not without its defects, but there is one point I want to make. Many people have said that this legislation will help just the wealthy. This is not so. Imputation is a very important incentive to buy shares for those taxpayers on lower than the maximum tax rate. Take for example the taxpayer with a marginal tax rate of 30 per cent. In effect if he or she buys shares, those dividends will have a rebate at that rate of 49 per cent-the rate of taxation for public companies-when the individual may be paying only a 30 per cent marginal rate of tax. This is a very powerful incentive for those on a lower income tax rate to buy shares and so reduce their overall taxation commitments. One of the minor anomalies-perhaps not minor, but it was alluded to by previous speakers-that I am concerned about is that this legislation will, in effect, increase the Medicare levy on those taxpayers who are in the top tax bracket. The reason for this is fairly complicated. That is something that this legislation, which purports to overcome double taxation, should not be allowed to affect. All in all, this country has been subjected to the iniquity of double taxation on dividends for a long time. It has been talked about since the post-war years and so far no government has been prepared to attack this anomaly simply because most governments, I believe, have been concerned only with maximising the tax take. This short-sightedness has had the effect of shrinking the capital base in this country alarmingly. Less than 10 per cent of the capital in our public companies is now in the hands of private shareholders. That is a very disturbing figure. Many Australians have no real interest in and no concern about how our major companies perform. They have no stake in their prosperity. They sit back and see the takeover merchants make large fortunes on the stock market. The average Australian has been discouraged from investing simply because he has been subjected to a 78.4 per cent tax on dividends from public companies. Happily, we will see some substantial and fundamental changes as a result of this legislation-one positive step forward in the Government's taxation legislation. I am delighted that this legislation is set to pass the Senate in the dying hours of this Parliament. Senator WALSH(Western Australia-Minister for Finance)(4.28) —I did not hear very much of the second reading debate but we had a second reading debate on many of these measures before they were referred to a Senate committee. I do not propose to delay the Taxation Laws Amendment (Company Distributions) Bill 1987 and cognate Bills with a lengthy reply as there are a number of matters which will come up in the Committee stage in response to amendments. Question put: That the amendment (Senator Short's) be agreed to. The Senate divided. (The President-Senator the Hon. Kerry Sibraa) Ayes . . . . . . . . . . . 33 Noes . . . . . . . . . . . 27 —— Majority . . . . . . . . . 6 —— Alston, R. K. R. Macklin, M. J. Archer, B. R. Messner, A. J. Baume, Michael Newman, J. M. Baume, Peter Parer, W. R. Bjelke-Petersen, F. I. Powell, J. F. Boswell, R. L. D. Puplick, C. J. G. Brownhill, D. G. C. Reid, M. E. (Teller)Collard, S. J. Sanders, N. K. Crichton-Browne, N. A. Sheil, G. Durack, P. D. Short, J. R. Haines, J. Teague, M. Hamer, D. J. Vanstone, A. E. Jessop, D. S. Vigor, D. B. Kilgariff, B. F. Walters, M. S. Knowles, S. C. Watson, J. O. W. Lewis, A. W. R. Withers, R. G. MacGibbon, D. J. Aulich, T. Giles, P. J. Black, J. R. Jones, G. N. (Teller)Bolkus, N. McKiernan, J. P. Button, J. N. Morris, J. Childs, B. K. Ray, RobertCoates, J. Reynolds, M. Coleman, R. N. Richardson, G. F. Cook, P. F. S. Ryan, S. M. Crowley, R. A. Sibraa, K. W. Devlin, R. Tate, M. C. Elstob, R. C. Walsh, P. A. Evans, Gareth West, S. M. Foreman, D. J. Zakharov, A. O. Gietzelt, A. T. Townley, M. Robertson, E. A. Carrick, Sir John McIntosh, G. D. Guilfoyle, Dame Margaret Maguire, G. R. Chaney, F. M. Colston, M. A. Mason, C. V. J. Cooney, B. (Senator Hill did not vote, to compensate for the vacancy caused by the resignation of Senator Grimes). Question so resolved in the affirmative. Original question, as amended, resolved in the affirmative. Bills read a second time. The Bills. Senator SHORT(Victoria)(4.37) —The Opposition in the House of Representatives, when the Taxation Laws Amendment Bill (No. 2) was being debated, drew attention to its concern about clause 62 of the Bill which relates to the powers of access to information by officers of the Australian Taxation Office. Clause 62 would amend the legislation specified in Schedule 4 of the Bill, those Acts being the Income Tax Assessment Act, the Pay-roll (Territories) Assessment Act, the Taxation Administration Act, the Tobacco Charges Assessment Act and the Wool Tax (Administration) Act, of which by far the most important is the Income Tax Assessment Act. I will use as an example the Income Tax Assessment Act. Clause 62 would amend that Act to add to section 263 the following sub-section (3): The occupier of a building or place entered or proposed to be entered by the Commissioner, or by an officer, under subsection (1) shall provide the Commissioner or the officer with all reasonable facilities and assistance for the effective exercise of powers under this section. The Opposition has no complaint with that sub-section as it is drafted, but we do have problems with the explanation of it contained in the explanatory memorandum on page 106. Senator Walsh —What section was that? Senator SHORT —It is clause 62 of the Taxation Laws Amendment Bill (No. 2), which provides for an addition to section 263 of the Income Tax Assessment Act. To quote from the explanatory memorandum sub-section (3), which I have just read out, would ensure: . . . that the Commissioner or an authorised taxation officer who has entered or proposed to enter a building or place for the purposes of the Act is entitled to reasonable facilities and assistance for the effective exercise of powers under section 263. We have no complaint with that. We do, however, have a concern about the next part. It states: An authorised taxation officer will thus be entitled to reasonable use of photocopying, telephone and light and power facilities and of work space and facilities to extract relevant information stored on computer. In addition, the officer will be entitled to reasonable assistance in the form of, for example, advice as to where relevant documents are located and the provision of access to areas where such documents are located. There is a maximum penalty for failure to comply of $1,000. The Opposition's concern was also picked up by the Senate Standing Committee for the Scrutiny of Bills when it looked at this Bill. It said: The Committee is concerned that the provision may impose an objective requirement upon the occupier of premises which that person may be unable to satisfy. The `Occupier' may, for example, be a junior employee and may be unable to provide access to certain safes or filing cabinets even though a court might consider the requirement to provide such assistance to be `reasonable' in all the circumstances. The Committee would therefore prefer to see the provision recast so that the occupier might advance a `reasonable excuse' for failure to provide the facilities or assistance required or so that the obligation is only placed on the occupier to provide such facilities or assistance as he or she is reasonably able to provide. The Scrutiny of Bills Committee recognises, as does the Opposition, that that provision is the same as a provision which has been inserted in recent times into the Fringe Benefits Tax Assessment Act 1986 and, I understand, into some of the sales tax legislation. However, the Scrutiny of Bills Committee drew to the attention of honourable senators the provisions to be inserted by Schedule 4 in the following terms: . . . by failing to take account of what it may be reasonable for a particular occupier to provide by way of facilities or assistance they may be considered to trespass unduly on personal rights and liberties. The Opposition supports the views of the Scrutiny of Bills Committee in that respect. We are also concerned that the provisions with which the occupier of a building is obliged to comply-when one takes the explanatory memorandum in conjunction with the Bill-are very wide indeed. It could be a very expensive operation for an occupier to comply with the full request. There is no provision at all in the legislation for the occupier to have the right to recoupment or reimbursement of the expenses involved. They may be minor or they could be major; the Bill is fairly open-ended in that regard. We on this side of the chamber would have preferred to move an amendment to require the Taxation Office to reimburse expenses incurred in this activity. As I understand it, we cannot, as an Opposition, do that, but I would ask the Minister for Finance (Senator Walsh), who is at the table, and the Government to have a look at this issue so that we do not as a result of this amendment, impose on the occupier unfair burdens and unreasonable requirements for access and related matters. As I said, we do not object to the principle involved in terms of reasonable access and reasonable provision; it is those other aspects to which I have referred that cause us concern. Senator WALSH(Western Australia-Minister for Finance)(4.45) —Mr Chairman, I had advice that an amendment was to be moved. The CHAIRMAN —There are no amendments. Senator WALSH —Okay. I will just reply to the points raised. Senator Short has stated correctly that similar or identical provisions are in some other tax legislation which has recently been passed. Under certain conditions the argument put would have some validity; that is, if the Australian Taxation Office really did impose very heavy costs on the keeper of records, such as a bank, for example, in providing the assistance needed to get the information. I do not think the Taxation Office has behaved like that in the past and I do not think it is likely to do so in the future. Therefore, although it is not a completely frivolous point, the Government's view is that it is not of sufficient importance to write something into the legislation to enable a payment to be made, say, to a bank for the use of its facilities. Indeed, I think it more likely that the cost incurred by a bank in providing those facilities would be less than the cost of sending out an account to the Taxation Office to seek recoupment for them. Finally, I understand that this measure in general has been quite well received by banks, and I am not aware of any specific complaint about the costs which may be imposed on them because of the amendment to section 263 of the Income Tax Assessment Act. The reason that the banks are, at worst, not opposed to the legislation-I understand that in many cases they are actually in favour of it-is that the existing law leaves them in a rather invidious position; that is, the Commissioner of Taxation does not have the legal authority to demand that records relevant to tax liabilities be produced. But in the end, the Commissioner usually gets them one way or another and the banks can for a prolonged period be in a position where there is some conflict of interest between their obligation to co-operate with the Tax Office and what they currently see as an obligation to their clients to protect the clients' confidentiality. I am informed that this very often put the banks in a difficult situation. For that reason, they are happy with, if not actively supportive of, the proposed measure. Senator SHORT(Victoria)(4.47) —I thank the Minister for Finance (Senator Walsh) for his remarks. They do not really satisfy my concerns. I will explain them again and add just one additional point. What we feel should be reflected in some form-not necessarily in the legislation but perhaps in explanatory or supporting documents-is a definition of the term `reasonable'. At the moment there is no definition, as I understand it, in this legislation of what `reasonable' means. The meaning of the word `reasonable' can be as long as a piece of string. We believe that `reasonable' should be defined specifically and that, in accompaniment with that, demands over and above what are defined as reasonable should be accompanied by reimbursement to the occupiers or banks, or whatever they are, involved. That is the aspect that I was trying to get at before. The other point that I omitted to mention was that, I understand, according to a submission from the Australian Bankers Association: There is no practical way of protecting Taxation Officer access to files documents information (particularly that on computer) that may not be divulged by virtue of the secrecy provisions of the laws of-- Here the submission refers to the laws of other countries. I cite two examples that are mentioned, the Singapore Banking Act and Hong Kong law. The submission goes on to state that the company and/or its employees may be in a legal dilemma, that is, be prosecuted for not providing assistance under Australian law or be prosecuted for divulging customer information under Singapore or Hong Kong law, or for that matter the law of other countries. If that point is correct, it seems to pose a considerable dilemma for banks complying with what is proposed. I would like an assurance from the Government that that would not be a problem for Australian organisations in the way that they see it to be a problem at this stage. Senator WALSH(Western Australia-Minister for Finance)(4.51) —It is difficult to see how officers of a bank operating in Australia could be prosecuted for breaches of Hong Kong law, but that leaves open the possibility that the bank may be discriminated against in some other way if it operates out of Hong Kong or has branches there. In relation to the imposition on banks-conceivably it could apply to some other institutions-and the requirement to give reasonable assistance and so on, I am advised that the Commissioner of Taxation could, and probably will, issue some guidelines which further detail how that is to be interpreted. If-and I think it is a highly unlikely event-subsequently the Government received complaints from institutions that they had incurred quite substantial expenditure because of this provision, I give an undertaking that I will raise the matter with the Treasurer (Mr Keating) as to whether or not they should be reimbursed for it. But I think it is highly unlikely that that will happen. Returning to the earlier point about the laws of another country being breached, I am advised that extra-territorial application of Singapore or Hong Kong law will not apply in Australia, and that is consistent with what I said earlier. I suppose that that leaves open the other possibility that a bank might run the risk of having some other action taken against it as an institution in another country, but I do not think that one ought to go too far down that track because, in relation to a country that specialises in setting up tax havens or even in laundering or safeguarding money for criminal elements, I think that everybody would agree, in the latter case at least, that under Australian law no special consideration should be given to banks that are involved in that sort of thing, or to banks that operate in countries that may provide those sorts of, to say the least, anti-social services. Bills agreed to. Bills reported without amendment or requests; report adopted. Bills (on motion by Senator Walsh) read a third time. Consideration resumed from 19 March. TAXATION LAWS AMENDMENT BILL (No. 5) 1986 Clauses 1 to 6-by leave-taken together, and agreed to. Clause 7 (Dividends paid instead of interest under short term finance arrangements). Senator SHORT(Victoria)(4.59) —by leave-I move: (1) Page 2, clause 7, proposed subsection 46c (1), definition of ``debt dividend'', subparagraph (a) (i), lines 36 and 37, leave out the subparagraph, insert the following subparagraph: ``(i) the share: (a) in the case of a redeemable preference share-was issued after the commencing time; or (b) in any other case-was issued after 28 November 1986;''. (2) Page 3, clause 7, proposed subsection 46c (1), definition of ``debt dividend'', paragraphs (b) and (c), lines 4 to 20, leave out the paragraphs. (3) Page 3, clause 7, proposed subsection 46c (1), after the definition of ``loan'', insert the following new definition: `` `redeemable preference share' means a share issued by a company the holder of which has a right to a specified rate of dividend before ordinary shareholders receive a dividend and in relation to which there is set out in the memorandum or articles of the company provision for the redemption of the share;''. This clause relates to the changes to be made by the Government to legislation concerning redeemable preference shares and other short term financing arrangements which constitute, in essence, debt rather than equity. As stated on page 8 of the explanatory memorandum, the purpose of clause 7, which inserts a new section 46c into the Income Tax Assessment Act, is to implement the proposal announced on 7 April 1986 by the Treasurer (Mr Keating) in a Press release to treat as debt, for income tax purposes, shorter term redeemable preference shares. The Committee will recall that this Bill was debated in the Senate in March and on 19 March the Senate referred the Bill to the Standing Committee on Finance and Government Operations for report on the following matters: Firstly, whether the provisions of the Bill relating to short term redeemable preference shares extend beyond the terms of the Treasurer's announcement of 7 April 1986; secondly, whether any parties relying on the clear wording of the Treasurer's 7 April 1986 announcement will find their legal rights retrospectively affected by the passage of the Bill in its present form; thirdly, the form of amendment, if any, necessary for the Bill to conform to the limits of the Treasurer's announcement; and, fourthly, whether the provisions relating to quarterly payment of provisional tax will be unduly onerous on provisional taxpayers whose income is subject to fluctuations throughout the course of a year and, if so, whether the amendment of the Bill to provide the election of payment of provisional tax in full at 31 March can achieve relief for those taxpayers only. This amendment to clause 7 relates to the first three of the four terms of reference. The Finance and Government Operations Committee reported to the Senate a couple of weeks ago on this matter. It was a divided report; the majority, which was achieved due to the casting vote of the Chairman, concluded that the Bill did not involve retrospectivity whereas the other Committee members found that the Bill went beyond the terms set out in the Treasurer's original announcement of 7 April 1986. You, Mr Chairman, will recall that there was a gap of almost eight months between the Treasurer's announcement of 7 April 1986 in relation to the income tax treatment of redeemable preference shares and the introduction of the Bill in late November 1986. The Opposition supports the minority view of the Finance and Government Operations Committee that the Bill as drafted goes beyond what was announced by the Treasurer on 7 April 1986 in two respects. First, in the Opposition's view, the Treasurer's 7 April Press announcement quite clearly related to redeemable preference shares, and redeemable preference shares only, whereas the Bill that was introduced eight months later refers to redeemable preference shares and other short term financing arrangements. The Bill has effect from the date of the Treasurer's Press release-7 April-so the Opposition believes that the part of the Bill covering redeemable preference shares and other financing short term arrangements is, quite clearly, retrospective. The other area where the Bill, in the view of the Opposition, differs from the Treasurer's original announcement is that on 7 April the Treasurer said that the amendments would apply to redeemable preference shares and any other redeemable shares issued-issued being the key word-after 7 April. The Bill, on the other hand, applies to certain redeemable preference shares and other short term financing arrangements issued before 7 April, so in that respect we believe that the Bill has retrospective application. Because of its retrospectivity, we oppose this clause very strongly indeed. We do not oppose the objective that the Government is seeking to achieve in relation to redeemable preference shares and short term financing arrangements, and I stress that at the outset; what we disagree with is the retrospective application in the two instances to which I have referred. The Senate Standing Committee on Finance and Government Operations took evidence on this matter from the Australian Taxation Office and a range of companies, particularly leading taxation and accounting firms, that had been concerned, as we are concerned, with the retrospective elements. I will refer briefly to some of the issues that came up in that context. First, the Commissioner of Taxation, Mr Boucher, in a letter to the Chairman of the Finance and Government Operations Committee on 14 April, attached the Australian Taxation Office's submission to the Senate inquiry and said that the Taxation Office concluded that it was only on a literalist view that it could be said that the proposed amendments extended beyond the terms of the announcement. He also said that even in that case parties would have to have deliberately chosen after the announcement to seek to exploit what they saw as a loophole. The taxation officers in giving evidence to the Committee engaged in discussion that was very helpful indeed on the question of whether or not the legislation was retrospective. During that dialogue between Committee members and the taxation officers, Mr Nolan, the Second Commissioner of Taxation, responded to a question from me. In effect, I asked: `Are you really running the risk, by having a Press statement released eight months before legislation is announced, of quite unequivocally introducing what in effect is retrospective legislation if the application of the Bill is to go back to the date of the original announcement? I would have thought that was unequivocally retrospective legislation? Would you have any comment on that?' In response, Mr Nolan said: I think we could have, with the benefit of hindsight, recommended some tightening of the announcement, which would have overcome this difficulty. To the extent that the announcement was not as precise in its terms as the legislation is there has to be acknowledged that there is a degree of retrospectivity. Whether one is offended by that in the particular circumstances is a matter of judgment. There is an element of retrospectivity. The Second Commissioner of Taxation in evidence to the Committee was refreshingly frank and entirely proper in stating his view, and that view was that this legislation contains an element of retrospectivity. Therefore, the evidence of a very senior officer of the Taxation Office supports the point we are making-that the Bill contains an element of retrospectivity, which applies in the two ways we have suggested. The amendment I have circulated seeks to remove that element of retrospectivity in two ways. It deletes from the Bill any application of the Bill to shares issued before 7 April 1986 in accordance with the quite explicit wording of the Treasurer's Press release of 7 April 1986. The second effect is to remove from the application of the Bill between 7 April 1986 and the date of introduction of the Bill-28 November-short term financing arrangements other than redeemable preference shares, because short term financing arrangements other than redeemable preference shares were not referred to in the Treasurer's Press release of 7 April 1986. Indeed, the Press release was specifically headed `Redeemable preference shares, income tax treatment'. It is perfectly clear that that was the content and purpose of the Treasurer's statement of 7 April 1986. On previous occasions we have referred in both Houses to the very disturbing trend that we have seen in recent years of governments introducing legislation in effect by Press release months and months before the actual legislation is introduced and the problems that always arise from that. That always runs the risk of the sort of thing that has occurred in this instance happening. The Opposition is absolutely, totally and adamantly opposed to any form of retrospectivity, particularly in relation to taxation legislation. If people are to go about their business in a reasonable, commercial or other manner they have to know what the law is. For legislation to be introduced which goes beyond the original announcement by the Government is total anathema to us. Senator HAINES(South Australia-Leader of the Australian Democrats)(5.11) —While I have some sympathy with what Senator Short is trying to do I believe that he has gone beyond the concern that I expressed during the second reading debate. It seems to me that the effect of the Liberals' amendment would be that the legislation would not have any effect prior to 28 November, even with regard to transactions that were mentioned by the Treasurer (Mr Keating) in his Press statement of 7 April-or whenever it was. My concern and that of many people is not simply that Treasurers and others are attempting to legislate by Press release but that, having made a statement about changes that the Government intended to make to the law, the legislation amending the principal Act when finally introduced goes beyond what was signalled in the original Press release. Legislation that follows precisely what was signalled in the Press release would not of itself be a problem, particularly in the tax area where it often takes quite a number of months for the complex legislation that is required to close off a loophole or to correct an unintended consequence to be drafted and to appear before Parliament. Our concern simply is that when legislation is introduced it does not go beyond what was signalled in a Press statement made by the Minister concerned. Accordingly, we will not support the Opposition's amendment, as I believe that in not having the legislation to apply until 28 November it in fact over-corrects the retrospectivity to the extent that it does not apply to transactions, even those mentioned in the Press release. Senator Short —No, it does; we do not bring everything forward to 28 November. Senator HAINES —From having a look at it, it seems to me that it goes beyond our concerns, and the Democrats' amendment which we have circulated and which I hope at least some people have had time to look at will allow the Act to operate from the date of the Treasurer's announcement, if the transactions operating were those that were mentioned by the Press release of 7 April. In fact, we have had some talks with the people who have contacted us about the legislation and they are certainly satisfied with the amendment that we have drafted. They believe that it solves their problems and, as a consequence, the Democrats will proceed with our amendment and we will not offer support for the amendment moved by the Opposition. Senator SHORT(Victoria)(5.13) —I wish to pick up a point that Senator Haines has made, as I may not have explained myself very clearly or Senator Haines may have misread our amendment. I make clear that we are not proposing that so far as redeemable preference shares are concerned the situation be changed at all from that which was stated in the Press release of the Treasurer (Mr Keating). In relation to redeemable preference shares we are saying that the provision will apply from 7 April, the original date of the Treasurer's Press statement, but we are removing the retrospectivity in relation to redeemable preference shares issued before that date. So, we are not going up to the date of the Bill but we are taking the application of the Bill back to the date of the Press statement. The only measures for which we are not doing that are those in relation to financing arrangements other than redeemable shares, which were not mentioned in the original Press release. In relation to those other financing arrangements, that is, financing arrangements other than redeemable preference shares, we are saying that the retrospective element between 7 April and 28 November would be removed. However, the key issue concerns the redeemable preference shares and we agree with the Government's starting date in relation to that, namely, 7 April, the date on which the Treasurer made his first announcement. Senator WALSH(Western Australia-Minister for Finance)(5.15) —This is a complex issue and before replying specifically I think that I should give some background. The legislation seeks to close off from 6 April-the date of the announcement-a tax avoidance practice. The matter is rather complicated but, basically, companies which had unequal tax liabilities worked out arrangements under which a company, instead of lending money to another company, that is, a company that was fully taxable, would take out redeemable preference shares or some other short term financial arrangement. Because of the operation of the section 46 rebate-that is, that money flowing as dividends from one company will not be taxed again in the hands of the company receiving the dividends-the company which was notionally buying redeemable preference shares would accept a rate of interest probably at anything above 8.1 per cent, and receive the same after tax return. There was of course a consequential loss to revenue. In practice what happened was that those companies which collaborated in devising such shonky arrangements pocketed the money that they had robbed from all other taxpayers. Let there be no mistake about it. This was a dishonest device to defraud the revenue and to take advantage of loopholes in taxation law so that both companies or partners to the arrangement got a financial advantage, at the expense of Consolidated Revenue and all honest taxpayers. It was a clear abuse of section 46 of the Income Tax Assessment Act. The Liberal Party proposes to close off from 6 April-and it has this in common with the Government-such dishonest financing arrangements which defraud the Commonwealth of revenue only if they are called redeemable preference shares. If they are called something else, so far as the Opposition is concerned, there can be open slather-for raids on Commonwealth revenue.The rationale or excuse for doing this is that the Press release of the Treasurer (Mr Keating) did not explicitly mention anything other than redeemable preference shares. If the Opposition's amendment were carried, any shonky financier who set up an arrangement at any time between 6 April and 28 November, which had exactly the same effect but which was called something other than redeemable preference shares, could get away with it, could grab the money from public revenue and run away with it. If that principle were accepted it would mean that in future if any preference arrangement was less than exhaustive in listing the scope of its application and anything less than completely watertight in its wording, it would be open season for any shonky accountant or tax lawyer to devise a mechanism which would facilitate the continued robbing of honest taxpayers of revenue, as was the case in relation to the previous arrangement. If I may say so for the record, I am not at all impressed by tax lawyers and accountants coming along to the Senate Standing Committee on Finance and Government Operations and putting in a special plea on behalf of people who do that sort of thing. One of the problems with this country is that far too many shonky tax accountants and tax lawyers have been engaged for more than a decade in grossly anti-social activity of that type. The professions have a great deal to answer for. It is a long established principle that measures to close off loopholes or the exploitation of loopholes in the taxation law-loopholes, incidentally, which have often been opened up by the High Court of Australia, but I leave that aside-become operative from the date of announcement. If the Opposition's amendment is carried that long established principle is no longer viable. Senator Short —That is not correct. Senator WALSH —Of course it is correct, unless the Press announcement is absolutely exhaustive in the scope of the legislation and watertight in its wording. If Senator Short's amendment is accepted and succeeds, the only thing which will then be viable is legislation which has been drafted and presented to the Parliament. That, as we all know, is an exercise that can take a very long time. The Opposition's amendment is a signal that we should go back to the bad old days when John Howard was Treasurer and abuse of the taxation law was so rampant that eventually it produced the bottom of the harbour schemes which, not, I suggest, for ethical reasons but for purely political reasons, the Fraser Government then partially dealt with by legislation which was unequivocally and absolutely retrospective. That is the sort of position that Senator Short would lead us into again if he got his way. In respect of any short term financial arrangement which was not called a preference share but which had the same effect in defrauding the revenue and robbing honest taxpayers, if the Opposition's amendment were to be accepted, this legislation would have relevance for only 12 days, that is, the 12 days between 28 November and 10 Dec- ember of last year when the whole procedure was overtaken by the imputation legislation. Therefore, for all the reasons I have given, the Government will be voting against the Opposition's amendment. Senator SHORT(Victoria)(5.22) —I must reply to some of the comments made by Senator Walsh. As has been his wont on many occasions, he has just branded some of the most reputable, most important and most significant legal, taxation and accounting firms and financial institutions in this nation as cheats and frauds. That is a totally unacceptable proposition from the Opposition's point of view and, quite frankly, disgusts me. Is Senator Walsh trying to tell the Australian people that firms such as Partnership Pacific Ltd, Baker and McKenzie, Deloitte, Haskins and Sells, First National Ltd, Freehill, Holdingdale and Page, Clayton Utz, and Touche Ross and Co.-some of the best known and most reputable firms in Australia, whose integrity has never been questioned other than by people such as Senator Walsh-are cheats and frauds? That is what he is trying to say. I say to Senator Walsh that it is about time he watched his language in terms of the way he vilifies and smears people in the Parliament and elsewhere without any justification. The taxation committee of the business law section of the Law Council of Australia made a brief but very pertinent submission to the Senate Standing Committee on Finance and Government Operations. So Senator Walsh's decrying of the witnesses who came before the Finance and Government Operations Committee applies by extension to the Law Council of Australia. Senator Walsh said something which was quite incorrect. I do not know whether he also misunderstood me, but the Opposition's amendment does not give open slather to short term financing arrangements other than redeemable preference shares. It agrees with what the Bill is doing as from its date of introduction. Senator Walsh —It is relevant for 12 days. You might as well forget about it altogether. Senator SHORT —The Treasurer (Mr Keating) should have got his drafting right when he put out a Press release on 7 April stating what he was on about. If he was on about short term financing arrangements as a whole in this respect, why did he put out a Press release entitled `Redeemable Preference Shares'? Senator Walsh just mentioned the Press release of 10 December, to which he seems to attach particular virtue. Page 5 of the 10 December Press release, under the sub-heading `Redeemable Preference Shares', states: The Government announced on 7 April 1986 that redeemable preference shares issued for an effective term of less than 2 years would be treated as debt for tax purposes; that meant that tax loss companies could no longer derive a tax advantage by issuing such preference shares at the expense of the revenue. Fine-that is okay. The next paragraph states: Since that date- that is, since 7 April- the Government has become aware of attempts to avoid the effects of this measure and, while it is expected that many of these attempts will prove ineffective under general anti-avoidance laws, the Government has decided to further strengthen the law in this area. In other words, the Government said on 10 December that it was going to strengthen the law beyond what it proposed on 7 April. My case in terms of retrospectivity rests. The Treasurer himself admitted in his Press statement of 10 December that there was retrospectivity. Senator HAINES(South Australia-Leader of the Australian Democrats)(5.27) —We are getting to the stage now where interpretations and accusations are being flung around this chamber willy-nilly. I for one would like some time for calm reflection on what has been said. Accordingly, I move: That progress be reported. Question resolved in the affirmative. Progress reported. Debate resumed from 11 May, on motion by Senator Button: That the Bills be now read a second time. Senator TEAGUE(South Australia)(5.29) —The States Grants (Tertiary Education Assistance) Amendment Bill, the States Grants (Schools Assistance) Amendment Bill and the States Grants (Education Assistance-Participation and Equity) Amendment Bill are Bills which regularly come before the Senate for cost supplementation each year. They relate to schools funding, higher education funding and a participation and equity program. The Opposition will not oppose these three Bills, but will move a second reading amendment in regard to the schools supplementation Bill, to protect non-government schools from the intrusions of this Government and, in the Committee stage, will seek to amend those parts of the Bill that will restrict non-government schools in the provision of housing or other residential accommodation for teaching or other staff and will seek to remove from the Bill the Labor Government's restriction that no moneys be spent by non-government schools to provide facilities for use wholly or partly for religious worship. Subject to these amendments, to which I will come in due course, naturally we support the moneys allocated in this legislation because those moneys will go to schools both government and non-government. The schedules of these increases are set out in the Bills. In summary, they total $106m, being $78m for tertiary institutions, $1m for the participation and equity program and $18m for schools supplementation this year, with $9m foreshadowed for 1988. Schools are of vital importance in debates in this chamber, and indeed to Australian families. Parents care directly about the education that their children will receive because they count it to be the most valuable acquisition of children outside the family itself. That is so strongly the contention of the Liberal Party of Australia that its schools policy in this current election context is not to reduce any provisions for schools but to enable choice to be exercised freely by parents so that they may ensure that their children receive the education that they desire. At the moment just more than a quarter of Australia's school children are attending non-government schools and 73 per cent are attending government schools. The supplementation that we have before us ensures that 100 per cent of the cost of a government school place is provided by the taxpayer, mostly through the States using Commonwealth untied grants and their other income. So state school places are fully provided by the taxpayer. In respect of non-government schools there is an enormous impediment, and that is that the parents themselves provide more than $1 billion towards the cost of school provision. This imbalance, this burden, that is placed upon the parents of students in non-government schools, we believe needs to be eased and not made heavier by the intrusions of this Government. There has been debate not only in the Senate but also increasingly amongst parent bodies in the States and Territories to see some fairness, some equity, in the distribution of taxpayers' moneys for those schools. All parents, or at least the great majority, are citizens who meet fully the taxation laws of this country. Those who have incomes are making taxation contributions that then go on to be spent in schools. Those without taxable incomes, whether on a pension or some other benefit, are in a very small minority. We believe that it is fair and equitable that there be proper recognition that all taxpayers should be fairly and equitably assisted in the education of their children. This contrast between the Liberal Party and the Australian Labor Party approach to the funding of schools will be a major aspect of the current election campaign. However, insofar as the States Grants (Schools Assistance) Amendment Bill is concerned we have no opposition to the additional moneys being granted according to the schedules that are set out. It will adjust the levels of funding that were put in place three years ago as a four-year funding program for schools. In respect of that four-year funding program I wish to refer to the unfortunate misleading of the Senate by the Minister for Education (Senator Ryan) at Question Time on Friday. I referred to this at the conclusion of Question Time today. The Minister, conscious that three-quarters of those children who are enrolled in non-government schools are attending Catholic systemic schools, wished to claim a trophy, a commendation, a direct endorsement, by the body that is responsible for policy in those schools. She cited a letter which she had received and which acknowledged only that the Government had met the request of the National Catholic Education Commission not to cut funding to Catholic systemic schools in the last mini-Budget. There was a great deal of speculation prior to mid-May as to what the Treasurer, Mr Keating, would be cutting in his bid to cut Government expenditure. Representations were made to the Liberal Party and the Government, including representations from the National Catholic Education Commission, that schools should not be in the front line of those expenditure cuts. I agree with that, and that is why the Liberal Party will not be making any cuts to expenditure on any schools in Australia, government or non-government. When the pressure from parents, the National Catholic Education Commission and the Opposition was taken into account, happily the Cabinet decided not to cut expenditure on any of the National Catholic Education Commission schools. When the Chairman of that Commission, Sir Bernard Callinan, wrote to the Minister on 19 May to pass on to her a copy of the most recent publication of that Commission's schools policy he directly acknowledged that there had not been cuts in schools funding and that indeed their representations had been successful. The Minister disgracefully referred to that letter in the Senate last Friday by saying this: . . . the four-year funding scheme is one of the proudest achievements of our Government. That is the legislation which is subject to this amending Bill. Senator Ryan continued: I should emphasise that the National Catholic Education Commission appreciates and commends our commitment to that scheme and it has welcomed and endorsed our policies. Both claims are nonsense. The letter does not say that. As any parent in any parents and friends association around Australia will know, the Catholic schools and indeed all non-government schools are directly critical of the apparatus that the present Labor Government has placed in the way of the expansion of non-government schools. There is a cry at every annual meeting of parents and friends and responsible administrators of non-government schools to remove the present Labor Government's intrusion into those schools. The claim of the Minister flies in the face of those hundreds and thousands of school and parents meetings around the country. When the Minister was picked up on this she was very embarrassed but failed to acknowledge that she has misled us. I make that point-I made it after Question Time today-to emphasise that there is not confidence amongst the schools of Australia in this Government's policy towards them. The principal new feature of the amending legislation is to institute a new block funding authority in each of the States and each sector concerning non-government schools. The Liberal Party does not see that this move is, in any way, necessary; neither is it convinced that the Government knows what it is doing or that it has a practical administration plan in mind for implementing it. As is well known in the Senate, this year $55m is made available for capital distribution to non-government schools; $155m is available for government schools in addition to that available to them from State revenue. That $55m is disbursed to the various States. There are advisory committees in the States broadly representative of all non-government schools and their ranking of the applications for capital grants is put together by the advisory committees and their recommendations come before the Minister. It is rare for the Minister to disagree with the priority rankings of the advisory committees. This mechanism is working and I have yet to hear any criticism of that procedure. Certainly in the second reading speech in the other place, and in the incorporated speeches in this chamber, there is no reference to any practical advantage flowing from legislation now before us to set up block funding authorities instead of these advisory committees. The Parliamentary Joint Committee of Public Accounts investigated, in a public hearing, what the Government intended to do. As was set out by my Liberal colleague in the House of Representatives Dr David Watson, the honourable member for Forde, witnesses for the Government lacked clarity as to how the block funding authorities would work and how moneys would be distributed between them. It is yet to be accepted by the Senate that this is a practical or beneficial move for schools. In addition, extra costs will fall on the funding authorities and they will be restricted in administering the disbursement of these capital moneys. To cover that, the Government has allowed for 2 per cent of the capital moneys disbursed up to a maximum of $35,000. As proposed, some block funding authorities will have very considerable administration costs and I directly criticise the inadequate provision of moneys. It will fall to those block funding authorities to make up the difference and so additional burdens will be placed on the peak non-government authorities. The Liberal Party's second criticism is that a new liability will fall upon block funding authorities for the recovery of any capital disbursements that flow to a school that closes down or that does not adequately and properly use the capital moneys for the purpose for which they have been granted. In the past this has been a matter between the Commonwealth Government-the funding body-and the various schools that receive the money. However, under these new arrangements the Commonwealth Government is passing the buck to the block funding authorities which will be legally required to account for the capital moneys disbursed. As is also well known in the Senate, any capital moneys disbursed to a school are deemed to have passed in equity from the Commonwealth to the school over a 20-year period. There is a 5 per cent growth per year in the amount of capital grant retained by the school that has received that capital allocation. If, after 10 years, a school that has received a capital grant were to close down, half of the capital that had been granted is the property of the school and half is refundable to the Commonwealth. That is a fair and well-established rule. The new aspect is that the block funding authority will be liable for the recovery of half of the money in the event that I have described. We believe that this amendment setting up block funding authorities is not practical, has not been explained in terms of completed administrative arrangements and it is further intrusive upon schools. It is also intrusive upon the state schools but not in the same way because the moneys intended for state schools will be going, as they have in the past and as they do now, directly to State government and administered through the departments of education and the States. The Liberal Party has a completely refreshing approach to schools funding in Australia. In the coming election campaign it will be very clear that it will not be lumbering non-government school authorities, or State governments for that matter, with additional bureaucracy nor will it be requiring the excessive accountability requirements that have flowed from the Connors report on Planning and Funding Policies for New Non-Government Schools. The Liberal Party wishes to see simple accountability-that is, accountability for the grant actually received through the Commonwealth-from all who receive Commonwealth grants, whether recurrent or capital, in the education area. They should give an account as to how that money has been spent and ensure that it is spent for the purposes for which it was granted. We will not be inquiring into the resources of a school, the additional funds and assets of a school, the fee levels, of a school and the paraphernalia of excessive intrusion that this Government has set up. In great contrast with the present Government we will be providing recurrent grants in respect of every enrolment in a non-government school. Over the last four years this principle has slipped away. If a school's extension or growth is not approved by the Commonwealth Government, any additional numbers do not currently receive any support at all from the Commonwealth. Similarly, new school that does not receive the very limited scope for approval that this Government has allowed does not receive any recurrent support. We will ensure that to enable parents to choose the type of education they wish their children to have, there will be recurrent grant in respect of every enrolment in a registered school. I now turn to the States Grants (Tertiary Education Assistance) Amendment Bill. As I have said, it is straightforward in giving supplementary moneys of $78m in the normal way according to adjustments to the schedules. Having this Bill before us gives us the chance to note the horrendous picture that lies before higher education if this Government continues in office after 11 July. It is clear from the May mini-Budget that for universities and colleges of advanced education next year there will be a $12m cut in education funding, and the year after a cut of $25m. The position is worse in technical and further education. All families with a member in a TAFE course should be warned that the cuts in TAFE announced in the mini-Budget are even worse that for higher education. Some $30m is cut out from its budget next year and the figure will be $45m the year after. This will lead directly to a reduction in student numbers in our universities, colleges of advanced education, institutes of technology and TAFE colleges. By contrast, the Liberal Party's education policies, which were clearly announced months ago, are a program for growth in TAFE, universities and colleges of advanced education. We wish to utilise the established educational institutions so that there are the same number of free places as there are now. We wish to ensure the award of higher education scholarships and TAFE student grants so that there is the same number attending these institutions; that is, we wish to ensure all post-school education to the same extent as it is now. But, in addition, we shall return full autonomy to our universities and colleges to map out their own destiny and to set their own future by enrolling anyone at all in addition to those with free places or scholarships on whatever terms those institutions may determine. There is a great opportunity not only to enrol those who have been turned away from institutions of higher learning, but also to tap a huge number of mature age people, particularly those aged 25 to 40, who are seeking to enrol in higher education institutions. The Australian Vice-Chancellors Committee and the Committee of Principals and Directors in Colleges of Advanced Education published eight days ago their assessment of the unmet demand in Australia in 1987. Enrolments for March have all been completed and the statistics have all been gathered. Their finding was that by the policies of this Government there is a 22 per cent increase in unmet demand in higher education this year compared to last; 13,000 to 20,000 applying students have been turned away from our universities and colleges this year. Some 44,000 persons were turned away, their applications for enrolment having been turned down. Because some of those 44,000 people have applied for more than one course, there has been an adjustment from the gross unmet demand to a net 13,000 to 20,000. That is equivalent to more than two universities. This is a disgraceful state of affairs and the present policies of the Labor Government have no way of dealing with it. The Labor Government has frozen the administration charge, it has denied any growth in student numbers and it has banned any private resources coming in to our universities and colleges. So given the cuts of the May mini-Budget, there is no other way out of the corner into which the Government has painted itself. In contrast, the Liberal Party will ensure the same number of free places, but will also ensure that a large part of the solution to the unmet demand will be achieved by allowing full autonomy to universities and colleges to enrol as they wish. In talking of student numbers, I wish to correct a claim that the Australian Labor Party has been making in the House of Representatives and in this place for some weeks. The claim is that in the first four years of the Labor Government there was an increase of 40,000 in student numbers, and in the last four years of the Fraser Government, Labor claims-and it is wrong-there was an increase of only 8,000. That is a comparison of 5:1 that Labor thinks it can chortle to all Australians. But when the Prime Minister, Mr Hawke, uses those figures, or indeed any Minister in this Government-and the Minister for Education used them in Question Time on Friday-they are wrong. I set out carefully, in the debate on the Appropriation legislation last Thursday evening, for about an hour in this chamber a number of matters, including this one, which is now clearly on public record. Let me state unequivocally that in the first three years of the Liberal Government led by Prime Minister Fraser the figures tabled by the Department of Education in the Senate to which I referred last Thursday show an increase of 26,800, and in the first three years of the present Government the increase was 32,900. I seek leave to incorporate in Hansard the Minister's table given in answer to my question at the Estimates committees. Leave granted. The table read as follows- Question: Senator Teague asked, 1. How many university students, expressed as ``equivalent full-time students'', were studying at Australian universities each year in the period 1970 to 1987? 2. How many advanced education students, expressed as ``equivalent full-time students'', were studying at colleges of advanced education each year in the period 1970 to 1987? 3. How many higher education students, expressed as ``equivalent full-time students'', were studying at institutes of advanced education each year in the period 1970 to 1987? Answer: Year Universities (EFTSU) (2) Advanced Education (EFTS) (3) (4) Higher Education (EFTSU/EFTS) (2) (3) 1974... 115,500 88,300 203,800 1975... 121,500 101,200 222,700 1976... 125,800 110,000 235,800 1977... 128,800 114,200 243,000 1978... 128,100 121,400 249,500 1979... 126,900 124,400 251,300 1980... 126,900 124,400 251,300 1981... 128,800 125,700 254,500 1982... 129,300 127,900 257,200 1983... 131,600 133,100 264,700 1984... 134,400 138,300 272,800 1985... 136,800 146,400 283,200 1986... 140,500 157,100 297,600 (1) Data for years prior to 1974 is not readily available. (2) Equivalent Full-Time Student Units (3) Equivalent Full-Time Students (4) Includes all students enrolled in advanced education courses including Colleges (including Institutes of Advanced Education) and TAFE Colleges. Includes all institutions except military establishments. These figures are not comparable to the information provided in the Monitoring Committee report. Senator TEAGUE —I thank the chamber. The table demonstrates that we have reached a plateau. If we are to depend entirely on public money for the ability to enrol students in higher education, we shall be stuck on that plateau. The contrast in this chamber is that Labor Senators have no policy change to offer but are locked into the plateau of no growth. We in the Liberal Party have an innovating return of autonomy to universities and colleges to accept the free places as they are now, but to enrol additional students on whatever terms they see fit. Finally, I come to the States Grants (Education Assistance-Participation and Equity) Amendment Bill. An additional $1m has been set aside for that program. What is clear is that the Government's rhetoric about participation and equity is so inflated that the balloon has now burst. The facts are that this is the last year of the program; this final topping up is the last time we shall see anything in relation to participation and equity. Those concerned were so disillusioned with the program's lack of success last year that they halved the money in 1986 to give half of it for the year 1987. The recent report of the Schools Commission `In the National Interest' found: It is difficult to establish a direct causal relationship between the activities which PEP has fostered and the rising levels of retention in secondary schools. This is the end of PEP, and it goes not with a bang but with a whimper. It has been an ineffective publicity exercise by this Government that has failed. We now see before us the final reference to it in amending legislation. Senator COLSTON(Queensland)(6.00) —The Senate is debating the States Grants (Tertiary Education Assistance) Amendment Bill 1987, the States Grants (Schools Assistance) Amendment Bill 1987 and the States Grants (Education Assistance-Participation and Equity) Amendment Bill 1987. I intend to make special reference to the States Grants (Tertiary Education Assistance) Amendment Bill 1987, the purpose of which is to adjust and supplement tertiary education grants to the States and the Northern Territory, taking account of the cost increases. I wish to use this debate to raise some matters relating to the lack of places at tertiary institutions throughout Australia. A great deal of debate is taking place in the community about the lack of places in universities and colleges, especially for young people who have just completed their secondary school education. Unwarranted attacks have been made on the Hawke Government, falsely accusing it of being to blame for the current situation. There is no evidence that the Hawke Government has been niggardly in its funding of the tertiary education sector. The opposite is the case. The Government's commitment to education, given the difficult economic conditions which prevail, is highly commendable. Certainly, the Minister for Education, Senator Susan Ryan, has every reason to be pleased that under her stewardship of the education portfolio far more tertiary education places have been created than in any comparable time by the previous Government. Of special significance to the State of Queensland, which I represent, is the fact that the Hawke Government has discriminated in favour of Queensland with funding for higher education. This has been necessary because Queensland lagged so far behind the other States when the Hawke Government was first elected in 1983. The poor state of post-secondary education in Queensland is a direct result of previous conservative governments' neglect. When tertiary funding was a responsibility of the States, successive Queensland Country Party-Liberal Party governments afforded tertiary education a very low priority. As a result, Queensland lagged behind other States in the opportunities it provided for young people in that State. After the Com- monwealth assumed responsibility for tertiary funding-an initiative of a former Labor government-the Fraser Government's funding policies exacerbated the unsatisfactory legacy of previous conservative governments. The Hawke Government recognised that additional funds were urgently required in Queensland and set about to provide young people in that State with the same opportunities as their interstate counterparts. It would be folly to suggest that the unsatisfactory situation in Queensland could be rectified overnight. If it could, I would be delighted. It would mean that thousands of young people, who could not secure a place at a university or college, would have the opportunity to further their studies. Yet, although there are no instant solutions, under the current Government Queensland has received a greater proportion of funding for higher education than it would have received, had funding been allocated on a strict per capita basis. Let us look at the figures associated with the funding of higher education in Queensland. Nationally, 36,800 extra higher education places have been provided since 1983. Within that national growth rate of 14 per cent, Queensland's share is 22 per cent. The 22 per cent increase in places compares extremely favourably with Queensland's population share of 16 per cent. In addition to this positive discrimination, this year's funding provides for the establishment of a Gold Coast College of Advanced Education. I would like to examine some of the other achievements in higher education under the Hawke Labor Government. Labor took office in 1983. Since that year tertiary education funding has increased by almost 8 per cent in real terms. That contrasts with the abysmal record of the Fraser Government. In the last four year of that Government, tertiary funding actually declined by 0.6 of 1 per cent. How can the Opposition criticise the Hawke Government's record when it has significantly increased funding of the tertiary sector and when its predecessor, the Fraser Government, actually presided over a decline in funding? The community does not generally recognise how much the Commonwealth spends on education. In this calendar year the Hawke Labor Government is spending $2,383m or $2.383 billion on higher education alone. When we take account of all of its other commitments we find that the outlay is about $5 billion. These are significant amounts which are sometimes overlooked when the record of the Government is being examined. These funds have provided increased educational opportunities for post- secondary students. I will be happy to look at the figures which the previous speaker, Senator Teague, incorporated in Hansard. I must admit that I did not see them before they were incorporated, but I will have a look at them later. However, I do not think that my figures are incorrect. As I mentioned earlier, the Hawke Government has increased the number of higher education places by 36,800. This is an increase of 14 per cent. This figure of 36,800 contrasts with a growth of 8,000 places in the last four years of the Fraser Government. There are now 400,000 students in higher education-an increase of 54,000 since 1983. No matter which way the figures are examined, they highlight the Labor Government's commitment to the tertiary sector of education. This Government not only has been interested in expanding the provision of educational opportunities but also has been interested and successful in increasing equity in participation in higher education. The greatest growth has occurred in outer metropolitan areas where there are large concentrations of lower socio-economic and other disadvantaged groups. Participation by women in education has increased substantially, with female enrolments in advanced education exceeding those for males for the first time. Aboriginal student participation in the higher education courses has increased from 700 students in 1983 to 1,500 in 1986. The Government expects a further increase of 20 per cent this year. It is one thing to provide opportunities for education. It is another to provide opportunities in areas consistent with the needs of the Australian economy. The Hawke Government has been mindful of its responsibility in this area and has thus fostered increased links between higher education institutions and industry. Business funding of chairs, co-operative projects and the activities of the commercial sectors of institutions have all increased. To assist in this area, the Government has established an industry liaison unit in Senator Ryan's portfolio. I referred earlier to the lack of places in tertiary institutions and made special reference to the situation in Queensland. I outlined measures that this Government had taken and is still taking to provide more places at tertiary institutions. At this stage, I would like to mention some of the consequences of a shortage of places at tertiary institutions. As well as creating problems for post-secondary students, the lack of tertiary places has an effect on students at secondary school. They study under the continual pressure of knowing that every test they complete is vital for their chances of going to a college or university. Neither is the lack of places conducive to the mental health of parents who know that their son or daughter is competing against every other student in the same year for the opportunity to carry on their studies beyond the year 12 level. These problems are present now, but this Government has not pushed them to one side. Rather, it has taken initiatives to make more educational opportunities available and to make the educational system more relevant. Young people clearly welcome these initiatives. The Government's efforts have borne fruit. In 1986 there were about 130,000 more people under the age of 25 in the post-compulsory education than in 1983. This was an increase of 16 per cent in just three years. The Hawke Government's approach to higher education funding has produced highly satisfying results. The task of rebuilding our tertiary sector after the years of Fraser neglect must continue. This Government has the will to continue the task. At the forthcoming election the people of Australia will acknowledge the fact that the Hawke Government has runs on the board. On the other hand, the higher education policy of the Opposition does not address the problem of providing tertiary places for young Australians in an acceptable way. It makes no commitment to increase funding. It undertakes to retain the number of publicly-funded places at the level of those now available; that is, about 390,000. An immediate consequence of this policy would be that there would be 5,000 fewer places available for first-year students. The Opposition's only answer to the shortage of places is to allow those who do not gain entry on their merit to buy a place. The only potential students who would be advantaged by this scheme are the wealthy or those who have wealthy parents. It is interesting to examine the cost of the Opposition's scheme for those students who have to buy a place at university or college. Let us consider a course in medicine. It is not unreasonable to expect that tuition fees for a course in medicine would be about $16,000 a year. That would have to be paid each year for six years. That is almost $100,000 for a start, without even considering living and accommodation expenses. Not all courses are as expensive as that, but they would still be far too costly for most Australians. A course in engineering would cost around $60,000 to $70,000 in fees alone and the fees for a full law course would be about $30,000. To this would have to be added living expenses. The reality is that only the extremely wealthy could afford this option. Under the Opposition's policy, all the good work that the Hawke Government has done at the secondary school level to increase participation would be dashed when young people tried to gain entry to higher education. This buy yourself a place scheme is no answer to the problems we are facing with higher education. In the coming weeks, the people of Australia will see that the Opposition is as bereft of realistic policies in this aspect of education as it is in many other areas. It is worthwhile examining the way in which the Opposition intends to administer its free places system. The Opposition intends to create some sort of voucher system for students who qualify for the free places. This is a badly thought out policy. The vast majority of students would try to cash in their vouchers at the larger, more established universities. This would assume that these institutions have an almost infinite capacity to expand. Of course, they do not, but we could initially expect them to grow quite substantially in student numbers. Meanwhile, under this Opposition policy, what would happen to the smaller and less established universities or colleges? They would begin to wither away. Their student numbers would drop and so too as a consequence would their staff numbers decline. This would not occur immediately, but it certainly would be a medium term result. In the long term, the outcome would restrict student choice because there would be a smaller number of institutions to which students could choose to go. How would a system of national scholarships be administered? There is a tremendous diversity in the various secondary systems throughout Australia. Each system has its own form of final year assessment. Putting a national assessment system into place would be an administrative nightmare. Would the Opposition force the states to adopt a particular form of assessment, or would the States simply be by-passed? What would the costs of the Opposition's policy be? We do not know presumably because the Opposition itself does not know. I could go on and comment further on the Opposition's ill thought out policy on higher education, but what I have said is sufficient to indicate that it is a policy which should be rejected by the Australian people. This Opposition had the opportunity in seven years of government to develop and improve tertiary education. Senator Robertson —It did nothing. Senator COLSTON —I take that comment, because it is ever so true. It failed to do so then and it is therefore comforting to know that the Opposition's policies will, due to the electors of this country, not be put into place. In conclusion, I reiterate that we do have a problem in providing places at the tertiary level. It is regrettable that this problem exists, but the Hawke Government has tackled this problem with vigor and with realistic policies. It will continue to do so. It is of particular importance to the people I represent that the Government will continue to discriminate in favour of Queensland until the provision of tertiary education in that State is equal to that of the other States of the Commonwealth. The Government is to be congratulated on its commitment in this area, and so too is the Minister for Education, Senator Susan Ryan. The Opposition's policy is no answer for potential higher education students throughout Australia. Amendment (by Senator Teague)-by leave-proposed: At end of motion, add: ``with the exception of the States Grants (Schools Assistance) Amendment Bill 1987, and that this Bill be withdrawn and redrafted to provide for the removal of constraints imposed on non-government schools, or on non-government school communities, which will in any way destroy their independence and opportunities for expansion or interfere with the special character of non-government schools''. Senator MACKLIN(Queensland)(6.16) —The States Grants (Tertiary Education Assistance) Amendment Bill, the States Grants (Schools Assistance) Amendment Bill and the States Grants (Education Assistance-Participation and Equity) Amendment Bill give the Senate an opportunity to look at the state of education in Australia in 1987. Given the forthcoming election, we need to look at the nature of Commonwealth responsibility for education. The central issue of the election is how Australia should best adjust in a period of economic change, education should be a crucial aspect of this debate. The dramatic decline in Australia's terms of trade and the very high level of foreign debt have made it clear that there must be far reaching structural change to the Australian economy. The recent Organisation for Economic Co-operation and Development survey of Australia stressed that we must shift the nation's resources to brain-based industries. In this way we can replace our reliance on primary industries for export income and enable our imports to be replaced by Australian-made goods. The Government believes that its policy of lowering protective barriers, allowing the dollar to devalue and providing tax concessions for private research and development spending will drive this reallocation of resources. Furthermore, the Government has contracted Budget outlays severely, based on the belief that this will dampen consumption and hence imports. It is also hoped that this will stimulate business investment in these new areas through a decline in public demand in loan markets. It is also hoped, of course, that interest rates will fall as a consequence. The trouble with this strategy is that it does not gell with the Government's education strategy. This Government, in looking at education expenditure, has treated it as part of the economic problem and not part of the economic solution. Devaluation and lower protection will not of themselves lead to more export-oriented and import-replacement brain-based industries. Appropriate human skills must also be developed. Therefore as a society we must invest more in our people. We must rely more than ever before on the quality of the Australian people and endeavour to improve that quality. The necessary investment in people will not come from the private sector. Indeed, the private sector has yet to fulfil the Government's expectations of increased investment in physical plant and equipment. At the same time as we were told last week of the Government's intention to call an election, we learnt that business investment in plant and equipment had fallen by 9.8 per cent in the March quarter. The necessary investment in people will come only through public expenditure. Given that the Commonwealth Government has the responsibility for the overall management of the Australian economy, the onus as far as investment in education is concerned rests with the Commonwealth. The Federal Minister for Industry, Technology and Commerce, Senator Button, told a conference in Melbourne recently that reform of the Australian education system was urgent and would make or break the economic development and living standards of Australia. Yet in the Government's May economic statement we find that it actually proposes to reduce expenditure on higher education and research in the coming two financial years. Amongst other things, general recurrent grants for higher education are to be reduced by $12m in 1987-88, if this Government is re-elected, and $24m in 1988-89. Those two items-a thrust on the part of the Government through its industry policy to base itself on brain based industries while at the same time depriving our citizens of the ability to partake, as employees and directors within those industries-do not go together. Senator Button —Would you agree that you have to take into account the universities' incomes from outside sources, particularly resulting from the taxation incentives? Senator MACKLIN —I take that point but I have just said that this funding will not be replaced by private investment. In fact, private investment, even in such things as plant and equipment, as I have already pointed out, dropped by 9.8 per cent in the March quarter. Supposedly, the Government suggests higher education institutions can absorb these particular cuts through increased efficiencies. I would like to know how they will be able to do this, given that last year's review of efficiency and effectiveness in higher education by the Commonwealth Tertiary Education Commission found that, through a decade of increased economies by the higher education system, there were hardly any significant areas for further cuts. Indeed, to quote the phrase used, there was `limited scope for additional savings'. That report makes it fairly obvious that the types of savings that would be available in that area are meagre pickings indeed-certainly nothing of the level by which the Government has chosen to cut education. At the same time, this report points out that advances made by the sector in that decade, in terms of large growth of student numbers and increased research, especially through contract research from private and other public bodies, were an important factor in the growth of Australia and Australian industries. The fact is that we have got a lot from the higher education machine. What it needs now is more oil. It is not a matter of building a new machine, as those who suggest the privatisation of public institutions are arguing at present. Doubtless during this election campaign these people will be arguing this with more noise and heat than quality argument. This year the Government achieved some growth in student places in higher education through the use of part-I stress, only part-of the revenue from the administration charge. Some 3,000 extra places have been created this year at a cost of about $18m. Considering that the effect of the across the board flat tax on students was to bring in $50m, that is a meagre amount indeed. Given the proposed cuts in the recurrent grants and the pipeline effect of this year's increased intakes, how does the Government, if it is re-elected, propose to increase intakes to meet at least some of the unmet demand for higher education places? This year between 13,000 and 20,000 people who qualified to enter higher education could not find places, according to the Australian Vice-Chancellors Committee and the Australian Committee of Directors and Principals in Advanced Education. What is the answer, then, to this problem of unmet demand? The Liberal Party of Australia proposes that public expenditure be held at existing levels-depending on other budgetary considerations-and that students be given the right to buy full fee places if they do not gain entry to publicly funded places. This will help the thick and the rich, no doubt, but it will certainly not help others. The most likely result would be those people finishing up with tremendous loans. Going down that particular track of loans and debt would take us into the ambit of the sorry state of the United States education system at present. As I pointed out last year, and as I had reaffirmed to me this year when I was in Washington two weeks ago, student dependence on loans in the United States has caused an incredible drop in the proportion of people from disadvantaged groups who are able to enter higher education. Those who have in fact gone into higher education are being saddled with debts which last for decades. In fact, the operation in the United States is now being called the negative dowry effect. Higher education students tend to be older than they are in Australia. They tend to marry and compound their debts and tend to find that other costs associated with marriage, such as children and houses, all have to be postponed. Those people who enter higher education are faced with this spiralling effect, and this situation has many people in the United States extraordinarily worried about where their entire system is going. The Government's answer to these types of problems, of course, has been to move towards fees. Two years ago the Minister for Education (Senator Ryan) went to the Labor Caucus to stop the efforts of some of her Cabinet colleagues to reintroduce fees. But, of course, she was fighting a losing battle. The implementation this year of the $250 administration fee is a sign of what is to come. I believe this Government is moving inexorably down the line of fees probably of the order of $5,000 within the next three years. I think it is inexorable, looking at all of the factors on the Government's agenda at the moment. The Government's monitoring committee on the impact of the charge has shown how flawed this particular scheme is. Despite the Government's efforts, disadvantaged groups, such as women financially dependent on their husbands, suffered through the charge; and the administration of the fee has been costly for institutions. The financial benefit to them of the fee is thereby significantly reduced. The message from this particular experiment with the administration fee should be clear: Fees are neither an equitable nor a financially efficient way of expanding higher education in this country. Of course, as Senator Teague claimed in a speech he made earlier, the Liberal Party was looking to giving a greater autonomy to higher education institutions through different financial arrangements. This particular claim can certainly be challenged on the basis of the likely effect of the Liberal Party's other proposal, to have a standardised test scheme as a way of allocating government scholarships to students. Such a national assessment scheme would require a return to a very narrow and very standardised curriculum, or an aptitude test similar to the Public Service entrance exam on which to judge students. Difficulties of examining and marking on a national basis would make it impossible for flexibility in accrediting students for higher education courses. Such a scheme would cut across the autonomy of higher education institutions to determine entrance criteria. Advances in senior secondary education in recent times have been achieved because universities and colleges of advanced education have been more flexible in determining entry criteria and criteria for success in higher education. A standardised testing scheme such as that proposed by the Liberal Party Opposition would in fact destroy these advances, not enhance them. The Australian Democrats are opposed to limiting the autonomy of higher education institutions with those types of standardised operations, as we are opposed to the Government's propositions with regard to fees. We believe that we need to take the 1977 funding base for higher education and fund education at least on that basis. If we did, undoubtedly public expenditure would have to rise, and that unmet demand would be satisfied through that operation. We advocate increased public expenditure on economic grounds alone, because it does not make sense not to make this particular investment if we are serious about allocating society's resources in such a way that more emphasis is placed on brain based industries. Certainly we should encourage supplementary private funding of higher education through partnership research and development, consultancies and bequests. Such funding is also a means of implementing technology transfer which we have available to us. But this funding should not be an excuse to reduce public funding of higher education further. One way of helping to guarantee this would be having the Government fund the sector on a long term basis, as it decided to do for the private schooling sector in the Bills it introduced in 1985. Sitting suspended from 6.30 to 8 p.m. Senator MACKLIN —Before the suspension of the sitting for dinner, in a discussion of the States grants Bills, I raised some issues with regard to the state of education in Australia today. I referred to the need to encourage supplementary private funding of higher education through partnership research and development, consultancies and bequests and, of course, it is a means of technology transfer to industry and to commerce in Australia. However, this funding should not be used as an excuse to further reduce public funding of higher education. I pointed out also that one way of helping to guarantee this would be for the Government to fund the higher education sector on a long term basis as it decided to do for the private schooling sector in 1985. Furthermore, there should be safeguards against short term activity geared to private sector needs undermining academic freedom and the role of higher education to provide long term curiosity-motivated research. Earlier this year I was appalled when the Liberal Party Waste Watch Committee questioned the worth of this latter sort of research when it examined the annual report of the approved grants of the Australian research grants scheme. It is worth recalling that the transistor and biotechnology are products of earlier so-called esoteric research. When we talk about the role of education in training to underpin economic development, I believe that it is necessary to stress the role of the technical and further education sector, a sector which is the joint responsibility of the Commonwealth and State governments. Too often, TAFE is forgotten in the education debate in this country. Schools attract attention because they concern families with young children; families and parents who are involved in their schools on a day to day basis along with the hopes that they have for their children. Universities and colleges of advanced education have on their side the prestige of professional education and fundamental research to advance their cause in society, but if we wish to restructure our economy, then the Commonwealth must provide more resources for technical and further education. This is especially so in the light of the May economic statement. If re-elected, the Government proposes that in the coming two financial years there would be a $200m reduction in general purpose payments to the States. This is in addition to stricter limits on borrowings by State governments and their statutory bodies. The ability of State governments therefore to devote the necessary increase in resources to TAFE must be in question and, when one considers that education as a percentage of State Budgets ranges between 25 per cent and 40 per cent, obviously the education sector in the State Budgets must be seen to be under threat. Perhaps of all the education sectors it is the TAFE sector that can respond most quickly to problems of shortages of needed skills in the work force and TAFE can be an effective means of giving opportunity to those people made vulnerable by economic and technological change. In this respect I am thinking of those young people who have left school at 15 or 16 years of age and who will be looking but, unfortunately, unable to find work, particularly in traditional areas of unskilled labour. There are many cases where these people need to be able to develop their skills through on the job experience. If they leave school and look for jobs, they are more likely to find dole queues. Also, I am thinking of new immigrants to this country and of those mature age workers who find their existing skills made redundant by technological change. These changes are necessary for the economy, but they are at a cost which should be spread throughout society and not borne by single individuals. All of these groups must have the chance to train or to retrain if they are to maintain their identity and self-respect. Through TAFE we can achieve a mass tertiary education sector. In recent years there has been remarkable growth in the TAFE sector. In the period from 1974 to 1984 TAFE enrolments in vocational and preparatory courses almost doubled from 458,000 to 831,000, which was an enrolment one and a half times as great as that of other parts of the higher education sector. Consistent with changes in the economy and the youth labour market, TAFE full time enrolments increased from some 38,000 in 1976 to 80,000 in 1984. No longer can we associate TAFE education with on-the-run night school training, yet the ability of the TAFE sector to meet the enrolment demand is even more constrained than that of the higher education sector. So I find it hard to swallow the logic of the Government's May economic statement which talks about the need for emphasis on training rather than the valium of short term job creation. The Australian Democrats agree with that philosophy, but the Government then proposes to cut the community employment program by $300m. It then plans to spend only $93m extra on training programs and that is after reducing general grants to States by $30m for TAFE purposes. If we recall the state of education five years ago, this problem of unmet demand for tertiary education is somewhat ironic. At that time we lamented the fact that the proportion of school leavers entering higher education had actually fallen, as argued in the 1982 Commonwealth Tertiary Education Commission report `Learning and Earning'. We were worried also about the poor retention rates in our schools as well as growing youth unemployment. That was five years ago. Now we find that the retention rates have improved dramatically. In 1982 the retention rate in Government schools to year 12 was 29.6 per cent. By 1985 that figure had risen to 40 per cent. While youth unemployment rates as a percentage of the youth labour market are still high-some 20-odd per cent-the actual size of that youth labour market has contracted as more young people have remained in education and in training. In absolute numbers, youth unemployment has decreased. In the light of these changes the Commonwealth has a moral obligation, as well as an economic imperative, to provide the necessary extra resources to higher education and technical and further education to meet unmet demand. If the Commonwealth does not do this-and to date it shows no inclination to do so-we will find that the pressures on the tertiary sector also will warp school education. There will be a race for credentials because, without them, a young person will have no future. Young people will undergo enormous stress in cramming for exams and the necessary school results for entry to tertiary education. As a result, we may find social problems in the form of youth suicides and mental breakdowns, not unlike that which takes place in the very highly competitive Japanese school education system. Wealthy parents will do all that they can to advantage their children in such an inhumane system. More parents will perceive that a private school education and not a government school education is a better start for the education race. This will lead to growing tensions between government and non-government schools, but such a situation hardly will be in the interests of the community as a whole. I believe that all this actually does flow from the Government's current position of trying to hold two incompatible policies with regard to young people. In contrast, the Democrats believe that the Commonwealth should bring about greater harmony between the sectors. It should use its funding powers as a means of bringing about a greater sharing of resources between the private and the state government school sectors along with a common approach to planning. Unless we solve this problem of unmet demand for post-secondary and tertiary education, we will find that schools will scramble over each other in the race to give their students better credentials for tertiary education entrance. I have argued strongly about the economic importance of education expenditure by the Commonwealth. But we must always put this in a larger context. Education is also about individuals, self-discovery and growth. Education provides a foundation for a democratic society. A passive electorate is too easily manipulated. Education must provide access to a shared cultural and intellectual heritage if it is to bind its citizens together into a Commonwealth. For these reasons, the extreme economic rationalists must not be allowed to capture policy makers. As eminent Australian historian, Sir Keith Hancock, says in his autobiography Country and Calling: `Life is a good deal more than its tasks, and training is only a part of education'. In looking at the wider structure, it is also interesting to note the following quotation from Tawney: Few tricks of the unsophisticated intellect are more curious than the naive psychology of the businessman, who ascribes his achievements to his own unaided efforts, in blind unconsciousness of a social order without whose support and vigilant protection he would be as lamb bleating in the desert. The role that education has to play is, in fact, to structure the broader society in which the economy is but a part. But this Government has treated education as part of the problem. When times are tough-and it is accepted that economic times are tough-I believe it can be argued, and argued cogently, that the last place to cut is in education. I have already quoted from a speech that Senator Button made not so long ago in talking about the role of education in the development of industry in Australia. I believe that what he had to say in that speech was correct but, unfortunately, the education policy of this Government runs in the opposite direction. We do need those skills for our citizens, but providing for those skills is a job for government. It will not be taken up by the private sector, which wishes to use the results of the education system, never acknowledges the usefulness of the education system but emphasises its failings, and never points to the fact that the education system underpins and provides it with the wherewithal to take from the general pool those creative, intelligent and useful individuals who provide the backbone of industry and the professionals and who provide industry and commerce with their greatest resource. An efficient education system is one which maximises the productive potential of the work force and gives that productivity a joint rather than an individual concept. As Davidson said in a very useful article recently, education can only maximise the community productive potential by providing an education which maximises the potential of all its citizens. I believe that we are facing a period in Australia's education debate that will move away from a discussion about what is the right school for pupils to attend-is it a private or a state school?-and will move to a debate about the role of education in general and the contribution it can make. We should welcome such a debate and, hopefully, in this election campaign the debate will be focused on that type of role. If that occurs, the simplistic notions that education, somehow, is only for the private good and not for the public good could easily be dispelled. It is necessary that we move forwards in this area and not backwards. The higher education sector is currently the most vulnerable sector in terms of government policy making and is likely to remain so during the period of the next Parliament whoever wins the next election and forms the next government. What we are looking at is continuing pressure on higher education institutions to provide more and more with less and less. That will not be possible and ultimately it will be seen that by starving our higher education institutions of funds in terms of both their teaching function and their research function we have done a massive disservice to Australia and its citizens for generations to come. Senator BJELKE-PETERSEN(Queensland)(8.16) —The three States grants Bills now before the Senate are machinery in nature and principally seek to grant additional funds for adjustments in cost escalations in tertiary educational institutions, schools and the participation and equity program. The National Party of Australia does not wish to oppose these Bills, understanding that such supplementation is necessary from time to time because of this country's high inflation rate brought about by this Government, although we are willing to support the second reading amendment that has been moved by Senator Teague on behalf of the Opposition. I will say from the outset that the larger issue of the usurping of the States' role in education by the Commonwealth Government is cause for concern. I will address that issue later. The first of these Bills, the States Grants (Tertiary Education Assistance) Amendment Bill 1987, provides $78m for retrospective supplementation in the areas of recurrent costs, capital and equipment expenditure and academics' salaries in accordance with increases granted by the Conciliation and Arbitration Commission. University academics' salaries, however, are not included in this round of legislation because they have a somewhat fanciful claim for a 100 per cent increase before the Commission. The second of these Bills, the States Grants (Schools Assistance) Bill 1987, amends the principal Act primarily to supplement grants to Government and non-government schools in 1987 and 1988 in accordance with the recent national wage case and with the general increase of price levels. The other major provisions of this Bill is to alter the method of allocating capital grant funds to non-government schools. Since this Government came to office this is the third major alteration in the method of allocating these funds. The latest arrangements provide for capital grants funds to be paid as block grants to approved authorities in each State. These block grant authorities will be responsible for recommending the funding priorities of their member schools to the Minister and later distributing moneys to these member schools. It is anticipated that two major blocks will be established in each State under the stewardship of the Catholic Education Commission and the Association of Independent Schools in each State. Any school not wishing to participate in a block authority will have the option of joining the national pool and applying to the Minister directly for capital funds. The National Party has no argument with the concept of this sort of decentralisation and minimisation of bureaucracy. Significant practical difficulties, however, arise from the proposed implementation of this program, and it is far from certain that any bureaucracy will be minimised. Although in principle this is a sensible program, the administrative guidelines proposed by the Minister are burdensome. The accountability requirements, as drafted, appear to be overly demanding, time consuming and full of anomalies. For instance, annual and quarterly reporting is required, however funds will be advanced to the block grant authorities in 11 equal instalments each year. It would seem more practical to coincide the reporting periods with the funding periods. In effect, the block grant authorities will be responsible for the initial administrative filtering of applications for capital funds. Any real decisions relating to the allocation of funds will be made by the Minister and determined according to strict criteria established by the Minister. The guidelines are unclear as to the level of involvement of the Department of Education and to what extent, if any, individual authorities will be able to make decisions in respect of determining funding priorities. Once individual projects have been approved by the Minister, funds will be able to be distributed by the block authorities. Because block grant authorities are required to have corporate status, they will also have all the legal obligations associated with such status. The legal position of the block grant authorities in relation to the Commonwealth's equity in school capital projects is problematical. Under the States Grants (Schools Assistance) Act 1984, the Commonwealth retains equity in any project funded by the Federal Government for 20 years, reducing at the rate of 5 per cent per year. Should any member school breach its agreement in respect of using a facility for its agreed purpose-for instance, if a school relocates or closes as a result of a rationalisation program-the block grant authority involved is liable for refunding to the Commonwealth the value of the outstanding equity. I suggest that this should be a matter between the particular school and the Commonwealth. Bodies such as the Catholic Education Commission and the Association of Independent Schools do not have the mechanisms and certainly do not have the funds to pursue legal action against member schools on behalf of the Commonwealth should such a situation arise. Certainly, the Commonwealth must ensure that the public interest is being protected, but the Minister's intention of vesting the block grant authorities with the Commonwealth's debt collecting role is an unreasonable expectation to place on such authorities. The block grant authority program completely bypasses the State education departments in relation to any input in the area of allocation of capital grant funds to non-government schools. Education is an area into which the Federal Government has systematically insinuated itself over the past two decades, with the current Labor Government being particularly active in this regard. Under the Constitution, responsibility for education rests with the States, except in relation to the Territories and student benefits. Section 96 empowers the Commonwealth to provide financial assistance to the States on such terms and conditions as determined by the Parliament. By virtue of the fact that the Commonwealth provides funds for education, the Minister has progressively assumed a more significant role in the direction and formulation of education policy, perhaps at the expense of the States. The establishment of the block grant authority program is yet another example of the erosion of States' rights. There exists no logical justification for the Commonwealth overseeing such a scheme and duplicating resources when the appropriate mechanism exists in each State. The National Party of Australia firmly supports the right of individuals to freedom of choice in education and supports the rights of parents to choose a form of schooling consistent with their beliefs and values. Indeed, there is no doubt that schools are of vital importance to all Australian families. Parents care about the education that their children will receive. I listened to Senator Teague telling us that 73 per cent of children attend government schools, while slightly more than 25 per cent attend non-government schools. However, the parents of the children who attend those non-government schools have to provide money to help meet the cost of their children's education, and that amounts to probably more than $1 billion. Many parents choose to send their children to non-government schools so as to provide them with a Christian education. Given that a significant number of parents choose this option for their children, I believe that this confers upon the Government a responsibility to maintain the non-government education sector. From 1974 to 1983 the growth of the non-government school sector was enormous. During this period primary enrolments in non-government schools increased by 11 per cent, while those in government schools declined by 3 per cent. In the secondary school area, non-government enrolments increased by a massive 29 per cent, compared with an increase of 8 per cent in government schools. It is of great concern to me that the non-government sector may be in jeopardy in the long term should the Commonwealth continue to intrude into the operation of these schools. We must support non-government schools, and I contend that the protection of their long term existence can best be provided by returning administration of this sector to the States. The third Bill before the Senate today is the States Grants (Education Assistance-Participation and Equity) Amendment Bill 1987. Again, this Bill seeks to provide retrospective cost supplementation for the participation and equity program. The PEP was established for the purpose of increasing participation rates in education beyond the compulsory years of schooling. Further, the program sought to address the problems of inequality of access to education for various disadvantaged sub-population groups. It is interesting to note that the Government has credited PEP with having made great advances in increasing retention rates. However, an examination of the figures cannot support this claim. The most substantial movements in retention rates occurred in 1983 and 1984. The participation and equity program was introduced in 1984 and that year was largely devoted to planning the actual programs and establishing the necessary administrative machinery. It was not until 1985 that the program became fully operational. I believe that the marked increase in retention rates in 1983 and 1984 was a response to the unprecedented increase in teenage unemployment. Australian Bureau of Statistics figures show that unemployment rates for 15-to 19-year-olds rose from 13.1 per cent in 1981 to 21.8 per cent in 1983. I do not dispute that the long term solution to the problem of teenage unemployment is for our youth to spend longer periods in education and to develop the type of skills that will assist them to gain employment. The participation and equity program is due to finish at the end of 1987. I suggest that the replacement program be designed to be more effective and less costly. It is interesting to note that Queensland has the highest student retention rate of any State-57.5 per cent, as compared to 44 per cent in New South Wales and 46.8 per cent in Victoria, and is well above the national average of 48.7 per cent. We all realise the vital role that education plays in the lives of all Australians, particularly our young Australians. The Government must do everything possible to assist the State governments with the necessary finance to ensure a continuation of good educational standards at all levels. As I said earlier, the National Party does not really oppose the passage of these Bills, although we support the amendment that has been moved by Senator Teague on behalf of the Opposition, namely, that, at the end of the motion for the second reading, the following words be added: . . . with the exception of the States Grants (Schools Assistance) Amendment Bill 1987, and that this Bill be withdrawn and redrafted to provide for the removal of constraints imposed on non-government schools, or on non-government school communities, which will in any way destroy their independence and opportunities for expansion or interfere with the special character of non-government schools. Senator RYAN(Australian Capital Territory-Minister for Education)(8.30) —I thank honourable senators for their contributions to the debate. There were some constructive contributions. I suppose it is always welcome when we are discussing education matters and education funding, although there are disagreements about amounts and principles of allocation, that at least there is agreement that education is an enormously important area for the Commonwealth Government to be involved in and an enormously important area for the community. Senator Bjelke-Petersen, who has just resumed her seat, at least endorsed the policy that our Government has been pursuing with outstanding success for four years now, of providing more and more young people with greater opportunities to continue their education and training. We have achieved this success by a number of means. It would be tempting to use the debate on the States Grants (Schools Assistance) Amendment Bill 1987, States Grants (Tertiary Education Assistance) Amendment Bill and the States Grants (Education Assistance-Participation and Equity) Amendment Bill tonight as an opportunity for us to rehearse our campaign speeches. Some honourable senators have probably already yielded to that temptation. However, I will not do so. Senator Macklin —Oh, come on! Senator RYAN —Senator Michael Macklin I am sure will have the opportunity to hear me on the campaign trail. Senator Macklin is very well aware, being a senator who takes a great deal of interest in education, of the enormous achievements of the Labor Government over the last four years. He is very well aware of the enormous increases in participation by students to the end of year 12. He would know that much of that increase has occurred in disadvantaged schools in disadvantaged areas. Schools in advantaged areas already had a very high participation rate. It was the schools in the poorer areas, government schools and also non-government schools serving poorer areas, which had desperately low rates of retention to the end of year 12 and which are now showing a much healthier picture. Senator Macklin will also be aware, because one of the pieces of legislation we are discussing is the States Grants (Tertiary Education Assistance) Amendment Bill, of the improvements and increases there have been in higher education. There has been rapid enrolment growth. Over 40,000 more students are now enrolled in our universities and colleges of advanced education than were enrolled when we took office. We have a much better level of student assistance. Every level of student assistance has been increased under the Hawke Government, which has enhanced the possibilities for students from poorer families or from struggling average families to take advantage of the 40,000 extra places we have created in our universities and colleges. Senator Macklin will be aware of other initiatives too, but as I said I will resist the temptation to make my campaign speech on this legislation tonight. We have before us three pieces of legislation which give cost supplementation to the States and the non-government systems for the schools programs which the Commonwealth funds, which give cost supplementation to higher education institutions and which conclude the funding for the participation and equity program, a program which I think everybody agrees by now has been extremely important in raising the awareness of teachers, parents, students and employers to the importance of having more young people complete their education, and in enabling schools to change and improve the standard of what they are offering to young people in years 11 and 12. There is one new element in the States Grants (Schools Assistance) Amendment Bill-the element which allows for the capital funds that flow to non-government schools throughout Australia to operate in a block grant fashion on a State by State basis if that is the wish of the non-government schools concerned. I am surprised that there have been criticisms of this scheme from those who claim to be supporting the non-government sector because the block grants scheme was a proposal brought to us by the Catholic school system in particular but supported by other parts of the non-government school system. We are responding to their wishes to have more control over their capital funds and to have more of the decision-making done at State level rather than at Commonwealth level in providing for these legislative changes. It is not a change being inflicted on the non-government sector; it is a change which has been sought by the non-government sector. After very thorough negotiations and discussions we have been able to provide that sector with what it wanted. There are further discussions about how the program will operate but, in principle-- Senator Teague —It is not clear at the moment. Senator RYAN —It may not be clear to Senator Teague, but a few things are not clear to Senator Teague. Senator Teague took some time in his contribution to the debate to dispute my claim that our schools funding programs have been generally endorsed by the Catholic Education Commission. I table now for the interest of honourable senators more evidence to support my claim-for example, the report of the statement by the National Catholic Education Commission Chairman, Sir Bernard Callinan, welcoming the new arrangements for new non-government schools. I have a further letter from the Queensland Catholic Education Commission, which says: Our schools have expressed their appreciation of the present eight year funding plan and of the assured funding levels it provides. I table, for the information of honourable senators, another letter from Sir Bernard Callinan to me dated 11 September 1986. It states, in part: It is our belief that the eight year program, as developed by government after widespread and intense consultation has brought to education systems and to schools a new stability, a capacity for forward planning and a relative freedom from unproductive sectarian debate. We believe that these new arrangements have contributed to genuine education renewal. I say to Senator Teague through you, Mr Deputy President, that that kind of statement is at the basis of my claim that our funding schemes have been welcomed and endorsed by the Catholic system and other systems. I table a letter to me from Mrs Margaret Slattery, the Executive Director of the Australian Parents Council, which says: I would like to congratulate you and your Government for giving the funding of schooling such a high profile in the May Economic Statement. The education of Australia's children is certainly a national priority. It goes on in the same vein. The letters are available for honourable senators to peruse. I say in conclusion to this debate that the programs to which the present three pieces of legislation contributed have been widely welcomed, endorsed, accepted and generally regarded as having led to a renewal and a regeneration of the quality of education in schools throughout Australia and to increased opportunities for children to take advantage of that high quality education. The second reading amendment moved on behalf of the Opposition by Senator Teague is not acceptable to the Government. Obviously it would lead to a total breakdown of planning and complementary development of schools of different character throughout Australia. I do not believe that anybody seriously is suggesting that the Commonwealth ought not to seek proper accountability for the very substantial funds that flow into the school systems, and I do not believe that anyone could seriously suggest that the accountability mechanisms we have in place are an unfair constraint or intrusion on those schools. It is our responsibility as a Commonwealth Government to know where our Commonwealth funds are going, to be able to tell the taxpayer that that funding is achieving the objectives for which it is set out. It is also of great importance that we facilitate the development of all school systems, be they government or non-government, in a way that will create constructive and harmonious relationships among schools, rather than bitter argument, hostilities and jealousies. It is for these very important accountability and social harmony reasons that we have in place a series of accountability mechanisms. We certainly do not intend to abandon them. So Senator Teague's second reading amendment is unacceptable. Nor will we support the Committee stage amendment to be moved by the Australian Democrats. I will explain the reason for that during the Committee stage. I thank honourable senators. As I said, it is heartening that at least every senator in the chamber seems to be at one as to the importance of education and the importance of the Commonwealth playing a constructive role in terms of upgrading quality and improving opportunity for children throughout Australia. I commend the Bills to the Senate. Question put: That the amendment (Senator Teague's) be agreed to. The Senate divided. (The President-Senator the Hon. Kerry Sibraa) Ayes . . . . . . . . . . . 28 Noes . . . . . . . . . . . 36 —— Majority . . . . . . . . . 8 —— Alston, R. K. R. Lewis, A. W. R. Archer, B. R. MacGibbon, D. J. Baume, Peter Messner, A. J. Bjelke-Petersen, F. I. Newman, J. M. Boswell, R. L. D. Parer, W. R. Brownhill, D. G. C. Puplick, C. J. G. Collard, S. J. Reid, M. E. Crichton-Browne, N. A. Sheil, G. Durack, P. D. Short, J. R. Guilfoyle, Dame Margaret Teague, B. C. (Teller)Hamer, D. J. Vanstone, A. E. Hill, R. Walters, M. S. Kilgariff, B. F. Watson, J. O. W. Knowles, S. C. Withers, R. G. Aulich, T. McIntosh, G. D. Black, J. R. McKiernan, J. P. Bolkus, N. Macklin, M. J. Button, J. N. Maguire, G. R. Childs, B. K. Morris, J. Coates, J. Powell, J. F. Colston, M. A. Ray, RobertCook, P. F. S. Reynolds, M. Cooney, B. Richardson, G. F. Crowley, R. A. Ryan, S. M. Devlin, R. Sanders, N. K. Evans, Gareth Sibraa, K. W. Foreman, D. J. Siddons, J. R. Georges, G. Tate, M. C. Gietzelt, A. T. Vigor, D. B. Giles, P. J. Walsh, P. A. Haines, J. West, S. M. Jones, G. N. (Teller) Zakharov, A. O. Baume, Michael Mason, C. V. J. Chaney, F. M. Elstob, R. C. Townley, M. Coleman, R. N. Jessop, D. S. Robertson, E. A. (Senator Sir John Carrick did not vote, to compensate for the vacancy caused by the resignation of Senator Grimes). Question so resolved in the negative. Original question resolved in the affirmative. Bills read a second time. The Bills. Senator TEAGUE(South Australia)(8.47) —In relation to States Grants (Schools Assistance) Amendment Bill 1987, I move: Page 3, clause 8, proposed subsection 25b (4), leave out the proposed subsection. This proposed sub-section is offensive to the Opposition because it compounds the government intrusion that has been a burden on non-government schools. It does this by interfering with the priorities that non-government schools would determine as being in the best interests of their development. This proposed sub-section relates to staff accommodation, to any capital project in a school which has this additional requirement that the facilities built must be, as far as practicable, equally available to male students and female students, and the provision that none of the capital grants so given should provide facilities for use wholly or partly for, or in relation to, religious worship. The three issues involved here are staff accommodation, facilities used by male and female students and facilities wholly or partly used for religious worship. The reason that the Liberal Party of Australia seeks the exclusion of this proposed sub-section from the Bill is that we do not want the Commonwealth Minister for Education interfering with the priorities and determinations of non-government schools. Already this Government has placed the burden of the fringe benefits tax on non-government schools with respect to staff housing. We opposed that measure at the time by moving a specific amendment but it was not supported by the Australian Democrats and government members, and we regret that. When there is a dire restriction on the resources available for any developing school, surely it is sufficient that it determines its own priorities out of those limited moneys. With regard to male and female students, it is not fanciful that one area of a school's development may be for industrial arts and that it is used more by male students than female students or that a home science block of classroom may be used more by female students than male students, as is current practice. We believe in equal opportunity and the free choice of students when choosing their curriculum and the subjects they undertake but there is a track record in these matters and the sub-clause remaining in this legislation may cause offence. It may deter non-government schools from making building plans that include those kinds of facilities. Finally, with regard to facilities used for worship, it is apparent that in very many schools-in developing schools in particular-assembly halls will be used for multi-purposes, including assembly for worship. In many schools classrooms are daily used as a place of worship. The beginning of the day begins as we do in the Senate-with prayer-and, in many classrooms, it begins with a bible reading and aspects of worship. Will this provision deny those acts in classrooms that are partly or wholly funded from capital grants governed by this amending legislation? It is entirely wrong for this Labor Government to interfere with the full rights of the councils of developing schools and existing non-government schools. They are already accountable to their parent body, their student body and their local community. We believe that no restrictions, no impediments, should be placed by this Government on worship in schools and there should be no arbitrary impediments, such as I have instanced about differences between male and female students' choices in curriculum, and so on. In conclusion, to save my rising again, I have noticed the amendment foreshadowed by the Democrats. It is restricted to a very small group of schools and is about staff housing. The three conditions that must be met-as I understand the Democrats' amendment-are, firstly, the housing must be in a rural or isolated area, secondly, there must be a scarcity of housing and, thirdly, there must be a demonstrated need to attract suitably qualified staff by the provision of such housing. It is very clear that a small slither of schools will meet those requirements. Whilst we are prepared to see our second reading amendment achieve all of the major improvements to this legislation, we are not prepared to see this Bill delayed and tossed between the Houses of Parliament for the want of this very small amendment. Therefore we support the amendment moved by the Opposition and we will reject the Democrats' amendment. Senator RYAN(Australian Capital Territory-Minister for Education)(8.54) —The Committee is under great time pressures so I will be very brief. I draw to Senator Teague's attention that part of the provision he now wishes to repeal-that is, the one prohibiting the use of funds specifically for teacher housing or to provide facilities in relation to religious worship-was introduced by his own Party. These provisions have been in place since 1976 and were left there every year of the Fraser Government. Clearly, there is a consensus of view that they are not an appropriate use of funds. We did not introduce those provisions; they were there. Senator Teague —They are being introduced by you. Senator RYAN —The provisions have been in place since 1966 and that matter can be checked. The equal opportunity provisions have been in the legislation since 1984. Senator Teague has never objected to them before and as far as I am concerned they have not been objected to nor have they caused any difficulty. They are in the spirit of equal access to facilities that exist in co-educational schools. That principle has been widely endorsed and I fail to see why it is causing Senator Teague any difficulty at this stage. In anticipation of the remarks that Senator Macklin will make regarding his amendment, I again say that although I understand the spirit of what he is trying to do in terms of bringing teacher housing within the scope of the capital program, it is simply impossible, given the pressures on the capital program for building new schools, upgrading old schools, extending schools and providing education facilities, for us to pretend that generally there would be funds for teacher housing. In the case of Aboriginal schools which I know Senator Macklin is particularly interested in, we have from time to time been able to assist with teacher housing there because funding was under the Aboriginal capital element of the program which is slightly different. In conclusion, the amendment is not acceptable. Question put: That the amendment (Senator Teague's) be agreed to. The Committee divided. (The Chairman-Senator D. J. Hamer) Ayes . . . . . . . . . . . 29 Noes . . . . . . . . . . . 35 —— Majority . . . . . . . . . 6 —— Alston, R. K. R. Lewis, A. W. R. Archer, B. R. MacGibbon, D. J. Baume, Peter Messner, A. J. Bjelke-Petersen, F. I. Parer, W. R. Boswell, R. L. D. Puplick, C. J. G. Brownhill, D. G. C. Reid, M. E. Collard, S. J. Sheil, G. Crichton-Browne, N. A. Short, J. R. Durack, P. D. Teague, M. (Teller)Guilfoyle, Dame Margaret Townley, M. Hamer, D. J. Vanstone, A. E. Hill, R. Walters, M. S. Jessop, D. S. Watson, J. O. W. Kilgariff, B. F. Withers, R. G. Knowles, S. C. Aulich, T. McKiernan, J. P. Black, J. R. Macklin, M. J. Bolkus, N. Maguire, G. R. Button, J. N. Morris, J. Childs, B. K. Powell, J. F. Coates, J. Ray, RobertColston, M. A. Reynolds, M. Cooney, B. Richardson, G. F. Crowley, R. A. Ryan, S. M. Devlin, R. Sanders, N. K. Elstob, R. C. Sibraa, K. W. Evans, Gareth Siddons, J. R. Foreman, D. J. Tate, M. C. Gietzelt, A. T. Vigor, D. B. Giles, P. J. Walsh, P. A. Haines, J. West, S. M. Jones, G. N. (Teller) Zakharov, A. O. McIntosh, G. D. Baume, Michael Coleman, R. N. Chaney, F. M. Mason, C. V. J. Newman, J. M. Cook, P. F. S. (Senator Sir John Carrick did not vote, to compensate for the vacancy caused by the resignation of Senator Grimes). Question so resolved in the negative. The CHAIRMAN —Order! The time allotted for the consideration of these Bills by order of the Senate has now expired. Amendments (by Senator Macklin)-by leave-negatived: (1) Page 3, clause 8, proposed subparagraph 25b (4) (b) (i), line 24, after ``staff'', insert ``at a school located in an area other than a rural or isolated area''. (2) Page 3, clause 8, proposed section 25b, at end of proposed section, add the following new subsection: `` `(5) The Minister shall not approve a project the sole or principal object of which, or one of the principal objects of which, is the provision of housing or residential accommodation for teaching or other staff at a school located in a rural or isolated area unless the Minister is satisfied: (a) that suitable accommodation for teaching or other staff at the school is not available or is scarce in the area; and (b) that in order to attract suitably qualified teaching or other staff so that an appropriate standard of education may be maintained it is necessary that the school provide suitable accommodation for some or all of its teaching or other staff.'.''. Bills reported without amendment. The PRESIDENT —The time allotted for the consideration of these Bills having expired, the question is: That the remaining stages of the Bills be agreed to and that the Bills be now passed. Question resolved in the affirmative. Bills read a third time. Consideration resumed. TAXATION LAWS AMENDMENT BILL (No. 5) 1986 Senator SHORT(Victoria)(9.05) —When consideration in Committee of the Taxation Laws Amendment Bill (No. 5) was interrupted before the suspension of the sitting for dinner I think most of what needed to be said about clause 7 had been said. I had moved on behalf of the Opposition an amendment to clause 7 to remove what the Opposition sees as the retrospective elements of the Bill. In the Opposition's view there are two retrospective elements, which follow from the fact that the original proposals for the legislation were set out in a Press release of 7 April 1986 and the legislation was introduced at the end of November 1986. In the opinion of the Opposition, and as stated in a minority report of the Standing Committee on Finance and Government Operations, the Bill contains retrospectivity in two respects. The original statement of the Treasurer (Mr Keating) referred to the proposed Bill as relating to redeemable preference shares issued after 7 April 1986. The Bill allows in certain circumstances for its application to shares issued before that date, so that is one element of retrospectivity. The second element of retrospectivity occurs because, while the Treasurer's Press statement referred only to redeemable preference shares, the Bill, which emanated eight months later, refers to redeemable preference shares and other forms of short term financing arrangements. The Opposition's amendment attempts to remove both retrospective elements, first by amending clause 7 to remove from it the application of the Bill to redeemable preference shares issued before 7 April 1986; and, secondly, to remove from the application of the Bill financing arrangements other than redeemable preference shares between 7 April 1986 and the date of introduction of the Bill, namely 28 November. Senator HAINES(South Australia-Leader of the Australian Democrats)(9.08) —The amendments moved by Senator Short on behalf of the Opposition take into account not only the retrospective element relating to redeemable preference shares but also the possible retrospective application to other short term financing arrangements. We have had considerable contact with legal and accounting firms which have been concerned about elements of this legislation, but we have not been given any examples of other possible short term financing arrangements which may have been put into operation between April and November and which may well have been jeopardised by this legislation; that is, picked up retrospectively as being inoperable. While we have not been given any indication of what those arrangements are, I would be loath to support a piece of legislation that takes a blanket attitude to what may or may not have happened between 7 April and 28 November. Certainly, we are concerned about the part of the case put forward by Senator Short and the Opposition relating to redeemable preference shares, but we cannot support the Opposition's amendments on the grounds that between 7 April and 28 November there may have been an arrangement, system proposal or whatever relating to some other short term financing arrangements put into operation which is likely to be affected retrospectively by this legislation. It seems to us that the very real danger of doing that is that we could run into the sorts of unintended consequences that we all dread in this place because the situation simply requires correcting or amending legislation. While I can sympathise with the concern of Senator Short and the Opposition that this legislation does not pick up retrospectively anything other than that which was specifically mentioned in the statement of 7 April, we do not believe that it is wise to go as far as this amendments seeks to go. We will oppose it. If the amendment is defeated because it is unacceptable to the Government we will proceed with an amendment of our own that deals with clause 7 but in slightly different terms. I do not want to take up the time of the chamber discussing our amendment as I shall get around to that if this amendment is defeated and we move ours. Suffice it to say, what we intend to move satisfies part of the concern of Senator Short and the Opposition but does not go as far as picking up all possible, probable, likely or hypothetical short term financing arrangements in a blanket amendment. Question put: That the amendments (Senator Short's) be agreed to: The Committee divided. (The Chairman-Senator D. J. Hamer) Ayes . . . . . . . . . . . 28 Noes . . . . . . . . . . . 36 —— Majority . . . . . . . . . 8 —— Alston, R. K. R. Lewis, A. W. R. Archer, B. R. MacGibbon, D. J. Baume, Peter Newman, J. M. Bjelke-Petersen, F. I. Parer, W. R. Boswell, R. L. D. Puplick, C. J. G. Brownhill, D. G. C. Reid, M. E. Collard, S. J. Sheil, G. Crichton-Browne, N. A. Short, J. R. Guilfoyle, Dame Margaret Teague, B.C. Hamer, D. J. Townley, M. Hill, R. Vanstone, A. E. Jessop, D. S. Walters, M. S. Kilgariff, B. F. (Teller) Watson, J. O. W. Knowles, S. C. Withers, R. G. Aulich, T. McIntosh, G. D. (Teller)Black, J. R. McKiernan, J. P. Bolkus, N. Macklin, M. J. Button, J. N. Maguire, G. R. Childs, B. K. Morris, J. Coates, J. Powell, J. F. Coleman, R. N. Ray, RobertCook, P. F. S. Reynolds, M. Cooney, B. Richardson, G. F. Crowley, R. A. Ryan, S. M. Devlin, R. Sanders, N. K. Elstob, R. C. Sibraa, K. W. Foreman, D. J. Siddons, J. R. Georges, G. Tate, M. C. Gietzelt, A. T. Vigor, D. B. Giles, P. J. Walsh, P. A. Haines, J. West, S. M. Jones, G. N. Zakharov, A. O. Carrick, Sir John Mason, C. V. J. Chaney, F. M. Robertson, E. A. Durack, P. D. Colston, M. A. Messner, A. J. Evans, Gareth (Senator Michael Baume did not vote, to compensate for the vacancy caused by the resignation of Senator Grimes). Question so resolved in the negative. Senator HAINES(South Australia-Leader of the Australian Democrats)(9.19) —by leave-I move: (1) Page 2, clause 7, proposed subsection 46c (1), definition of ``debt dividend'', after subparagraph (a) (i) insert the following subparagraph: ``(ia) if the share was issued before 8 May 1986-the share was not issued pursuant to an obligation: (a) that was in existence at the commencing time; and (b) a breach of which would result in a substantial liability for damages;''. (2) Page 3, clause 7, proposed subsection 46c (1), definition of ``debt dividend'', after subparagraph (b) (ii) insert the following subparagraph: ``(iia) if the short-term finance arrangement was entered into after the commencing time-the arrangement was a short-term finance arrangement only because of paragraph (a) of the definition of `short-term finance arrangement';''. (3) Page 3, clause 7, proposed subsection 46c(1), definition of ``debt dividend'' leave out subparagraph (c) (ii), insert the following subparagraph: ``(ii) the dividend was paid under a short-term finance arrangement that: (a) was entered into after the commencing time; and (b) was a short-term finance arrangement only because of paragraph (a) of the definition of `short-term finance arrangement';''. (4) Page 3, clause 7, after proposed subsection 46c(1) insert the following subsections: ``(1a) For the purposes of this section, the mere payment of a call in respect of a share after the com- mencing time does not, of itself, constitute the entering into of a short-term finance arrangement after that time. ``(1b) For the purposes of this section, the mere transfer of a share, or the mere obtaining of a letter of credit, or both, after the commencing time does not, of itself, constitute the entering into of a short-term finance arrangement after that time. ``(1c) Subsections (1a) and (1b) are enacted for the avoidance of doubt.''. By way of explanation I think it might be useful if I run through the instructions that we gave to the parliamentary counsel when we sought their assistance in drafting this amendment. We put five items to the parliamentary counsel with regard to having them draft this amendment. The first criterion was that the legislation be amended so that it not apply where the relevant shares were issued prior to the commencing time and where the only act subsequently undertaken was a mere extension of previously existing arrangements. However, we sought provision for the amendment to the legislation to not exclude other new short term finance arrangements entered into after the commencing time, and that it also apply to all substituted arrangements entered into after the commencement time. The second criterion that we put to the parliamentary counsel was that the legislation not apply where a person, after the date of announcement, has paid calls on partly paid shares issued prior to the commencing time. However, it was necessary to ensure that the legislation still apply whether or not shares were changed in character since the date of announcement. So that was a rider to the second criterion. The third criterion was that the legislation not apply where, after the commencement time, a person has taken no action other than that required under a legally binding contractural arrangement entered into prior to the announcement. The fourth criterion was that the legislation not apply where there has been a transfer of shares after the commencing time but where there has been no alteration to the rights attaching to the shares or the value. An example of such a transaction would be where a company holding short term preference shares transferred the shares to a subsidiary or holding company after the date of the announcement. Finally, we put in the requirement that the legislation not apply where shares have been issued prior to the announcement under legally binding arrangements but there has been an amendment of those arrangements after the commencing time, provided that any change to the Bill did not, firstly extend the time during which the arrangements operate; secondly, increase the amount of money to which such arrangements apply; or, thirdly extend the operation of the arrangements to shares other than shares first issued prior to the commencing time. In putting those criteria to the parliamentary counsel I believe we satisfied the concerns raised with us by a number of organisations regarding an element of retrospectivity that they perceived. It certainly ensured that the concern raised by the Standing Committee for the Scrutiny of Bills, among other groups and individuals, that legislation by Press release was getting out of hand. Our action acknowledged that concern and sought to ensure that to the best of everybody's ability the legislation applied only to the elements indicated in the announcement of the Treasurer (Mr Keating); that is, to redeemable preference shares. So we believe the amendments satisfy stated concerns regarding retro- spectivity. Having had the amendments drafted, my office got in contact with a number of the agencies which had contacted us and put to them, not just over the phone but by facsimile, what the proposed amendments were and sought their comments. Those groups indicated that they were satisfied that the concerns they had raised on this legislation had been picked up by these amendments and they had no further complaints. On those grounds, I commend the amendments to the Committee. Senator SHORT(Victoria)(9.24) —I regret that the Committee did not give sufficient support to the Opposition's amendment to rid the Bill completely of its retrospective elements. We in this country have suffered far too long at the hands of retrospectivity, be it in the taxation law or anywhere else. I therefore regret that even if Senator Haines's amendments are accepted there will still be an element of retrospectivity in the Bill, an element which, as I said previously, is acknowledged by the Australian Taxation Office. A Second Commissioner of Taxation, Mr Nolan, said before the Standing Committee on Finance and Government Operations: To the extent that the announcement- of the Treasurer, on 7 April 1986- was not as precise in its terms as the legislation is there has to be acknowledged that there is a degree of retro- spectivity. Whether one is offended by that in the particular circumstances is a matter of judgment. There is an element of retrospectivity. So it is generally accepted by all concerned including, I imagine, the Government, that there is this element of retrospectivity. An important problem is covered by the amendments moved by Senator Haines on behalf of the Australian Democrats in that they remove that retrospective element that applies to the issue of redeemable preference shares prior to 7 April 1986. That is the most important element, the one about which most concern has been expressed. But the amendment that I moved on behalf of the Opposition covered this element plus another-although this element certainly is the most important. In concluding my brief remarks and indicating that the Opposition will support the Democrat amendments, I draw Senator Haines's attention-perhaps I should have done so earlier-to the fact that in the first of her three amendments, under paragraph (a) (i), there is an issuing date of 8 May 1986 rather than 7 April. I wonder whether that is a typographical error. If it is she might wish to correct it. On the assumption that it is a typographical error and the date is changed to 7 April 1986, the Opposition supports the Democrat amendments-although I repeat that we regret that there is still an element of retrospectivity in the Bill. The CHAIRMAN —Senator Haines, do you wish to change your amendment? Senator Walsh —I do not think that `8 May' is a misprint or a typographical error. Senator HAINES(South Australia-Leader of the Australian Democrats)(9.27) —No, it is not a typographical error. I do not wish to change the amendment. It covers arrangements, deals or whatever we want to call them that were in train as at 7 April, and allows 30 days' grace. Senator WALSH(Western Australia-Minister for Finance)(9.28) —These amendments are a watered-down version of the Opposition's amendment. As such, they are less obnoxious than the Opposition's amendment. Senator Haines —Only marginally-be honest. Senator WALSH —No, it is more than marginally, at least according to the advice I get. The financial difference is more than marginal. But since these amendments are a watered-down version of a proposition in the Opposition's amendment that would let all tax dodgers get away with evasion, the Democrat amendments will let only a few tax dodgers get away with it. Therefore they are much less obnoxious than the Liberal Party's amendment-as we would expect them to be. But, of course, the Government cannot accept them. However, we accept from what has been said tonight that the amendments will probably be carried. I just hope, though not with any great expectations, that we will hear no more of the sanctimonious sermons from Senator Powell about how the Government should have more equity in the taxation and social security systems and should collect more taxes from people who can afford to pay in order to distribute higher social security benefits to those who need them. I hope that will happen but I do not expect that it will. The final observation I wish to make is that I have noted that Senator Harradine did not vote on the earlier amendment and I do not expect that he will vote on these, either. I can only assume, given his record in the Senate over the last five years, that the reason is that he does not bother to vote for measures which allow tax evaders to get away with their actions unless his vote is crucial. He has a long record of voting for retrospective tax legislation when his vote is not critical and voting against it when his vote is critical. I can of course only speculate as to the reasons for that inconsistency. Question put: That the amendments (Senator Haines's) be agreed to. The Committee divided. (The Chairman-Senator D. J. Hamer) Ayes . . . . . . . . . . . 33 Noes . . . . . . . . . . . 28 —— Majority . . . . . . . . . 5 —— Alston, R. K. R. Macklin, M. J. Archer, B. R. Newman, J. M. Baume, Peter Parer, W. R. Bjelke-Petersen, F. I. Powell, J. F. Boswell, R. L. D. Puplick, C. J. G. Brownhill, D. G. C. Reid, M. E. Collard, S. J. Sanders, N. K. Crichton-Browne, N. A. Sheil, G. Guilfoyle, Dame Margaret Short, J. R. Haines, J. Teague, B. C. Hamer, D. J. Townley, M. Hill, R. Vanstone, A. E. Jessop, D. S. Vigor, D. B. Kilgariff, B. F. (Teller) Walters, M. S. Knowles, S. C. Watson, J. O. W. Lewis, A. W. R. Withers, R. G. MacGibbon, D. J. Aulich, T. Giles, P. J. Black, J. R. Jones, G. N. Button, J. N. McIntosh, G. D. (Teller)Childs. B. K. McKiernan, J. P. Coates, J. Maguire, G. R. Colston, M. A. Morris, J. Cook, P. F. S. Ray, RobertCooney, B. Reynolds, M. Crowley, R. A. Richardson, G. F. Devlin, R. Ryan, S. M. Elstob, R. C. Tate, M. C. Foreman, D. J. Walsh, P. A. Georges, G. West, S. M. Gietzelt, A. T. Zakharov, A. O. Baume, Michael Sibraa, K. W. Chaney, F. M. Bolkus, N. Durack, P. D. Evans, GarethMessner, A. J. Robertson, E. A. Mason, C. V. J. Coleman, R. N. (Senator Sir John Carrick did not vote, to compensate for the vacancy caused by the resignation of Senator Grimes). Question so resolved in the affirmative. Clause, as amended, agreed to. Clauses 8 to 15-by leave-taken together, and agreed to. Clause 16 (Liability to provisional tax). Senator SHORT(Victoria)(9.37) —I move: (1) Page 13, clause 16, after proposed new subsection 221yba (1), insert the following new subsections: `` `(1a) Nothing in this section requires the payment of instalments of provisional tax by a taxpayer where the taxpayer makes an election under sub-section (1b). `(1b) A taxpayer may elect not to pay provisional tax by instalments in respect of the income of the taxpayer of a year of income specified in the election and of all subsequent years of income. `(1c) An election under subsection (1b) shall be made in writing and lodged with the Commissioner on or before the date of lodgment of the return of income of the taxpayer for the year of income next preceding the year of income specified in the election or within such further time as the Commissioner allows.''. The amendment proposes the addition of the abovementioned proposed new sub-sections to the proposed new sub-section 221yba (1). The three sub-clauses would have the effect of enabling provisional income taxpayers to elect whether they wish to pay their provisional tax under the Government's new proposed quarterly instalment arrangements or to remain with the existing system of a once-only payment towards the end of the year. It will be said by the Government, I am sure, that this amendment would have the effect of negating the proposal that the Government has put in relation to the quarterly payment of provisional tax. It is certainly not intended to do so. Rather it is intended to give more flexibility to provisional taxpayers whose payment arrangements, and therefore the desirability of their paying at different times of the year, will vary considerably. There may well be taxpayers who, for reasons of continuity, reliability and stability of cash flow, would in fact prefer to pay their provisional tax on a quarterly basis as is being proposed by the Government. On the other hand, there are taxpayers, particularly those with unusual and unpredictable seasonality in their incomes from one year to another and from one time of the year to another, for whom it is very difficult to pay on a quarterly basis as proposed by the Government. I appreciate that the Bill contains provisions to allow for some flexibility in terms of payment on other than a quarterly basis. Nevertheless, in the Opposition's view, that does not go far enough. For that reason, I have moved this amendment. I understand that the amendment moved by the Opposition will not have the support of the Australian Democrats and will therefore be lost. The Opposition does not propose to put this amendment to a division. We will consider separately alternative amendments that have been circulated by the Australian Democrats but, nevertheless, because of the principle involved in the issue, I wish to put this amendment formally. Senator HAINES(South Australia-Leader of the Australian Democrats)(9.40) —For a number of reasons the Australian Democrats will not support the amendment moved by Senator Short on behalf of the Opposition. With regard to provisional income tax, one of the reasons for the change to the legislation was to introduce a greater equity for pay as you earn taxpayers who have no choice but to have their tax payments deducted at source fortnightly or monthly, according to when they are paid, but nevertheless having the deductions made on a regular basis throughout the financial year. Therefore, it was something of an inequity that a number of people were able to pay provisional tax on an annual basis and were able to have full use of the money in the meantime. The passage of Senator Short's amendment moved on behalf of the Opposition I think would have meant introducing a fairly massive inequity between PAYE taxpayers and other income earners, including some very high income earners who have the capacity to make use of that money for the extra 12 months. Having said that, I do not think that there is a great deal of point in closing off one inequit- able situation in order to open another. In this case, I think that two groups of people need to be considered. One of those groups includes people whose income fluctuates quite significantly during the year or between the years, seasonally or for any other reason. The other group includes people in small business-and I mean small business and not larger businesses that hope to get away with being called small businesses by belonging to some association that includes the term `small business' in its name, when in fact the business is not small at all. In any event, I refer to genuine small businesses that simply cannot cope with the additional administration costs and that are too small to have accountants and smart lawyers to help them. We intend to oppose Senator Short's amendment, because I think that it only opens up a larger inequity than that which currently exists by allowing everybody total freedom to opt either for quarterly or for annual payments, in which case those who are likely to benefit from an annual payment will opt for that method and will get around what the Government is trying to do in closing the inequity. In that case we will certainly oppose the amendment, but we will move our own amendments that will pick up people who suffer from the problems associated with fluctuating incomes. At the moment, I will not discuss those amendments because I think that it is more appropriate that we deal with them when we come to them, but one such amendment relates to clause 16, following the defeat of this amendment to clause 16, and the other relates to an amendment to clause 20, which simply lifts the ceiling on a group of people who the Government has acknowledged already would be disadvantaged if the legislation with regard to quarterly or annual payments were not amended. Senator WALSH(Western Australia-Minister for Finance)(9.44) —I know that Senator Short did not claim this but, because it has been claimed before, I think it is worthwhile putting the record straight: Under the existing arrangements provisional taxpayers are advantaged over pay as you earn taxpayers, that is, wage and salary earner taxpayers, in two ways. First, if their incomes are constant, they pay their tax liabilities on average three months later than do PAYE taxpayers, but if their incomes are not constant, and that is a more common situation, they have the additional advantage that, in a year where the taxable income for the year on which the provisional taxation is levied, and that becomes payable at the end of March, is above the provisional tax assessment, which is necessarily based on the taxable income in the previous year, sometimes with some minor adjustment, the taxpayer is under no obligation to notify the Commissioner for Taxation that the taxable income for the year for which the provisional tax is being levied will be higher than the income which the Australian Taxation Office had assumed. With that obligation falling due on 31 March that means that the provisional tax, on average, is paid three months later. However, if the taxable income for the year on which the provisional tax is levied is less than that for the previous year and upon which necessarily the Taxation Office had based the provisional taxation assessment, the taxpayer has the option to vary that provisional tax liability downwards; in other words, it is an option that is stacked in favour of the taxpayer, with no corresponding penalty. Under the existing arrangements, the provisional taxpayer is advantaged over PAYE taxpayers in two ways. The Government Bill proposes that provisional taxpayers be liable to pay tax on a quarterly basis, thereby making it a little more equitable when compared with PAYE taxpayers. Therefore, the measure relates to equity, as well as other matters. As Senator Short mentioned, there are provisions for special circumstances and specifically this has some relevance to one of the foreshadowed amendments. I refer to those people who derive more than 75 per cent of their income from primary production being allowed to pay twice yearly instead of quarterly; in other words, to pay on 1 February and on 1 June, which leaves them in very much the same position in which provisional taxpayers are now, so it is an equity measure. There is an additional reason why the Opposition's amendment should not be accepted. The Opposition amendment effectively makes the payment of quarterly provisional tax optional; in other words, it virtually emasculates this provision of the Bill. Apart from the equity argument, there is another good reason for not accepting the amendment. Other things being equal, it would increase the Budget deficit by about $190m for 1987-88, $100m of which would be from increased public debt interest payments, because of the later collection of income tax, and about $90m which it is estimated would not be lost forever as would be the case with the public debt interest as the collection of it would be deferred until the 1988-89 financial year. So apart from the non-equity component the Opposition's amendment proposes to blow out next year's Budget deficit by $190m. I suppose that, if those opposite already propose a Budget deficit of $16 billion, $190m is a modest addition to it, but of course the Government will not accept the amendment and we are grateful that the Australian Democrats will not do so either. Senator SANDERS(Tasmania)(9.49) —I have listened to our millionaire, silver tailed fugitive from the Joh Nationals, the Minister for Finance (Senator Walsh), talk about the provisional tax somehow being advantageous to the small businessmen. I do not know whether the Minister has ever been a small businessman or whether he has ever really had to work for a living, but I tell him that, as a small businessman, a man who started a small business manufacturing slow combustion wood heaters in Tasmania, I believe that this provisional tax is the most iniquitous thing I have ever seen. What happens is that a person starts a business, gets it going, starts making a profit and thinks `Wow, we are doing all right; maybe we can make it this year', but all of a sudden is hit with a provisional tax. What is this provisional tax to do? It was a one shot scam by the government of the day to get more money at one time. It does not hurt the Broken Hill Proprietary Co. Ltd or any of the big companies, it does not hurt the Minister for Finance-he has millions; he does not care-but it hurts the small businessman. The Minister talks about equity as though somehow the Government will restore equity by taxing small businessmen more frequently through this provisional tax. That is not equity. It might help the Minister's friends in BHP, but it sure as hell does not help the small businessman. I am sick and tired of the Minister's talking as if he knows about business, because he does not. He may know about high flying finance and he may sit around with Sir Peter Abeles and the rest of his boys talking about what is good for the nation, which is basically what is good for Sir Peter Abeles, but the Minister does not have a clue about what is good for small business. Therefore, I think it is time that he took a good look at what is happening in this country and started backing small business and turning his back on the transnationals that seem to keep him in office. Amendment negatived. Senator HAINES(South Australia-Leader of the Australian Democrats)(9.51) —I move: Page 13, clause 16, after proposed new subsection 221yba (1), insert the following new subsection: `` `(1aa) Nothing in this section requires the payment of instalments of provisional tax by a taxpayer in respect of income of a year of income, being: (a) the actual taxable income from primary production of the taxpayer of the year of income, as defined in section 156; or (b) the abnormal income, as defined in section 158c, of a taxpayer to whom Division 16a applies.''. The amendment attends to two areas where an element of inequity could be introduced if something was not done about it. One area relates to primary producers whose incomes fluctuate sometimes within the year but frequently between years, and the other deals with the fluctuating income of people such as authors and inventors, the groups defined in sections 156 and 158c of the principal Act. It is important that we realise that there are some people for whom fluctuating incomes mean an inability to pay up when the need arises or who are likely to be due to pay a higher provisional tax than their actual tax payable turns out to be. These people, because of the wide variety of things that can affect their income earning capacity during any one year or between years, are not in a position to anticipate accurately the fluctuations in their income, and to do so by November when, I understand, a request for a variation must be lodged. This is particularly difficult for primary producers who cannot be 90 per cent certain of what their tax payable is likely to be and therefore are likely to be liable to the penalty that accrues to someone whose variation request is less than 90 per cent accurate in terms of their assessment. This amendment protects those people whose incomes can fluctuate widely without giving the sort of blanket choice for quarterly versus annual, or anything in between, payments of provisional tax that the previous amendment would have provided. I think it is fair to say that this is an equitable amendment to the extent that it provides a reasonable amount of choice without going overboard and takes into account the sorts of variations, fluctuations and problems that can occur in professions, jobs, businesses, et cetera, which do not have a steady income flow during the year, much less across years. This move will be completed with our amendment to clause 20, but it is not appropriate for me to refer to that amendment now. The amendment I have moved provides those groups of people in the community whose incomes fluctuate with a certain amount of leeway without embracing the sorts of catch-all provisions contained in the amendment moved by Senator Short. I commend the amendment to the Committee. Senator SHORT(Victoria)(9.56) —The Opposition supports the amendment moved by Senator Haines on behalf of the Australian Democrats, and I understand that I speak on behalf of Senator Brownhill in saying that the National Party of Australia also supports it. Before giving my reasons for support, in response to Senator Walsh's comment about the Opposition having built up a potential deficit of billions of dollars, I point out that Senator Walsh knows as well as I do, if he is being honest, that that is absolute nonsense and an absolute falsification of the real situation, just as the Government has been falsifying for the past four years the so-called deficit that it inherited in 1983. Senator Walsh knows that that is wrong, I know it is wrong, and the Australian people know it is wrong. The Opposition fully agrees with Senator Walsh and the Australian Democrats in stressing the need for equity in tax arrangements between pay as you earn taxpayers and other taxpayers. Our taxation policies over the years have tried to take that matter into account to the fullest. This amendment deals with provisional taxpayers who have fluctuating income. Both this Government and previous governments have recognised through income averaging that separate arrangements are necessary to maintain equity for those taxpayers who have variable incomes. A large majority of those taxpayers who use income averaging will also face problems under the provisional tax requirements proposed in the Bill because of the unevenness of income and the unpredictability of income. The amendment which the Democrats have moved, which the Opposition supports, deals with a point similar to the point dealt with in the Opposition's earlier amendment, although it does not go as far. It provides that existing provisional tax arrangements be retained for those taxpayers who are subject to income averaging. That is what this amendment is all about. The arrangements proposed by the Government will result in many primary producers in particular, but also other people in the community who have variable incomes and whose arrangements are now accepted by the Government as being subject to income averaging provisions, being required to make provisional tax instalments in advance of the accumulation of the taxable income to which the tax applies. That is contrary to the fundamentals of income tax and would be a quite unjustified imposition on those taxpayers. The provisions applying to primary producers in the proposed arrangements seem to the Opposition to make insufficient allowance for the unpredictability of primary production income. Seasonal conditions have an enormous effect in the primary industries not only on receipts but also on expenditure, and that makes the determination of taxable income extremely difficult. Senator Walsh —That is why you shouldn't be voting for it. I will tell you why in a minute. Senator SHORT —I look forward to hearing that. The fact remains that in the view of primary producer organisations, the Opposition, the National Party and the Australian Democrats, the provisions in the Bill do not go far enough to take account of those aspects facing primary producers in particular. Equity in taxation treatment, about which the Government is quite rightly expressing concern, will be enhanced in our view, if the Democrats' amendment is accepted. Therefore, both the Liberal Party and the National Party support the amendment. Senator WALSH(Western Australia-Minister for Finance)(10.00) —Firstly, may I apologise for a slight error that I made earlier when I said that the Taxation Laws Amendment Bill (No. 5) 1986 as presented to the Senate allows for people who get more than 75 per cent of their income from primary production to pay their provisional tax in two instalments instead of quarterly instalments. That is not quite correct. While the measure will encompass most primary producers, the actual provision stipulates that people who receive more than 75 per cent of their income after 1 December in a year-and have a record of doing so-may opt for the two instalment payments instead of four. It is unlikely that the Opposition will accept my word for this, but I point out that if the Australian Democrats' amendment is carried we will be back here during the Budget session amending the Act again, because the legislation in its amended form would be unworkable. It would be unworkable for the following reason: Paragraph (a) within the amendment refers to `the actual taxable income from primary production of the taxpayer of the year of income'. That means-and this explains the relevance of an interjection that I made while Senator Short was speaking-that in August or September, shortly after the commencement of a financial year, a taxpayer who wishes to claim the exemptions which would be provided for by this amendment should be passed would have to make an assessment of whether 75 per cent of his income would be derived from primary production. At that time of the year-and this of course is particularly applicable to grain growers but also to a number of other farmers to a significant extent-a primary producer would not be able to make any sort of reasonably accurate assessment of whether or not 75 per cent of his income would be derived from primary production in that year. Paragraph (a) then stipulates `as defined in section 156', and then a further alternative is provided in paragraph (b), relating to inventors. Likewise, an inventor would not be in a position at the time the election to pay instalments has to be exercised to make an accurate estimate of what the amount of income for that year might be. Obviously the Government cannot accept the amendment. We believe that it is also technically flawed, especially in relation to paragraph (a), and of course that only compounds the other difficulty that I have already referred to. Whether the amendment is a good idea or not, it is the sort of provision that would be almost impossible to administer. If the Committee insists on carrying it now, I guess the Government will accept it in the House of Representatives in order to get the Bill through, but I point out that we will be back here in the Budget session with a further amendment to this legislation-if not explicitly to the Act as it is now proposed, then as part of some miscellaneous amendments to all sorts of legislation to clean it up for technical reasons. Question put: That the amendment (Senator Haines's) be agreed to. The Committee divided. (The Chairman-Senator D. J. Hamer) Ayes . . . . . . . . . . . 34 Noes . . . . . . . . . . . 28 —— Majority . . . . . . . . . 6 —— Alston, R. K. R. Macklin, M. J. Archer, B. R. Newman, J. M. Baume, Peter Parer, W. R. Bjelke-Petersen, F. I. Powell, J. F. Boswell, R. L. D. Puplick, C. J. G. Brownhill, D. G. C. Reid, M. E. Collard, S. J. Sanders, N. K. Crichton-Browne, N. A. Sheil, G. Guilfoyle, Dame Margaret Short, J. R. Haines, J. Siddons, J. R. Hamer, D. J. Teague, B. C. Hill, R. Townley, M. Jessop, D. S. Vanstone, A. E. Kilgariff, B. F. (Teller) Vigor, D. B. Knowles, S. C. Walters, M. S. Lewis, A. W. R. Watson, J. O. W. MacGibbon, D. J. Withers, R. G. Aulich, T. Giles, P. J. Black, J. R. McKiernan, J. P. Bolkus, N. Maguire, G. R. Childs, B. K. Morris, J. Coates, J. Ray, RobertColeman, R. N. Reynolds, M. Cook, P. F. S. Richardson, G. F. Cooney, B. Robertson, E. A. (Teller)Crowley, R. A. Ryan, S. M. Devlin, R. Sibraa, K. W. Elstob, R. C. Tate, M. C. Foreman, D. J. Walsh, P. A. Georges, G. West, S. M. Gietzelt, A. T. Zakharov, A. O. Baume, Michael Evans, GarethChaney, F. M. Button, J. N. Durack, P. D. McIntosh, G. D. Messner, A. J. Jones, G. N. Mason, C. V. J. Colston, M. A. (Senator Sir John Carrick did not vote, to compensate for the vacancy caused by the resignation of Senator Grimes.) Question so resolved in the affirmative. Clause, as amended, agreed to. Clauses 17 to 19-by leave-taken together, and agreed to. Clause 20 (Notification of instalments of provisional tax). Senator HAINES(South Australia-Leader of the Australian Democrats)(10.11) —I move the amendment which I have not circulated to all honourable senators in the chamber because it is fairly simple: Page 20, clause 20, proposed paragraph 221ydaa (4) (b), line 41, leave out `$2,000', insert `$5,000'. Proposed new sub-section 221ydaa (4) specifies the two sets of circumstances in which the Government has already stipulated that taxpayers will not be liable to pay provisional tax by instalment. Specifically, paragraph 4 (b) describes the second of the two situations in which provisional tax will not be payable by instalment, namely, where at the proposed date of issue of the first instalment notice the previous year's provisional tax which, according to the explanatory memorandum, is a defined term, is $2,000 or less. The effect of this amendment will be to raise that limit from $2,000 to $5,000. In other words, it picks up people whose taxable income is around $25,000 per annum, that is, not much more than average weekly earnings. The Government's figure of $2,000 picks up people whose annual income from business and so on is around $15,000, taking into account the tax threshold and the marginal tax rate payable above that. We suggest that anybody who is in business and whose taxable income works out to around $25,000 per annum or even a little more is not in a position to have access to the sort of assistance provided by accountants and lawyers which people whose incomes are significantly higher would have. Therefore, we believe that they deserve to be assisted by this sort of amendment. Accordingly, I commend the amendment to the Senate. Senator SHORT(Victoria)(10.13) —On behalf of the Opposition and of Senator Brownhill for the National Party I support the amendment for the sorts of reasons Senator Haines has mentioned. The amendment aims to give some relief to and take cognisance of particularly the lower earning small business person at a time when, of all sections of the community, small business needs a boost. Senator WALSH(Western Australia-Minister for Finance)(10.14) —I note, and I should have noted it when the last amendment was on, that the National Party tail is still wagging the Liberal Party dog. Members of the Opposition have just made fools of themselves with the previous amendment by supporting something on the advice of the National Party which is technically not operable. In the unlikely event of the Liberal Party getting into government I hope it can get its act together a good deal better than it has been able to do so far. One would have thought that once the National Party lead was thrown out of its saddlebags it might have been appreciated the potential value associated with that, but obviously it has not. In regard to this amendment the point at which the threshold of exemption should apply is, I will concede, to a considerable extent an arbitrary judgment. Whether it should be $1,000, $2,000, $4,000, $5,000 or whatever is a matter for judgment rather than a matter of mathematical precision. The Government will not accept the amendment but I will not bother to call a division, given that it is less important than the other amendments which have been put up by the Australian Democrats and supported by the Liberal Party or those which have been put up by the Liberal Party and not supported by the Australian Democrats. I want to put on the record that if this amendment is carried-and it is pretty clear that it will be-there will be an addition to the Budget deficit for the next year of some $23m due to tax collections which would otherwise have occurred in 1987-88 being pushed forward into 1988-89. That is only a deferral, it is true. It is a one-off thing. There will also be increased public debt interest payments of the order of $25m which will be recurring cost. That is one of the reasons and probably the major reason why the Government will not accept the amendment. Those who say that $5,000 is the right figure are asserting an equally arbitrary judgment to the $2,000 figure, but a judgment which has significant both one-off and ongoing costs to revenue, and, therefore, to Budget deficits. Senator HAINES(South Australia-Leader of the Australian Democrats)(10.17) —I would like to address the basic rationale behind the Minister's statement. I do so by reminding him that back in 1981 under the Fraser regime the Prime Minister introduced nine sales tax classifications and exemptions Bills which imposed sales tax on a wide range of things from gold-plated cutlery through to food, building mat- erials and so on. If Senator Walsh cares to look back at the debate that took place in November and December of that year and again earlier in 1982 he might remember that it was his Party when in opposition that castigated the Australian Democrats for not joining the Labor Party then in opposition in opposing the whole of the sales tax classifications and exemptions legislation to a considerably higher cost to revenue than the one we are dealing with. Senator Walsh —But we are responsible now. Senator HAINES —I accept the Minister's interjection. What he is essentially saying is: `We are in government now. We do not want any of our legislation fiddled around with but we intend to be as irresponsible and cavalier as we like when we are in opposition'. I thought I would get that point on record. We are talking about far smaller amounts of money in relation to this piece of legislation than the amounts the Labor Party when in opposition sought to have deleted from the previous Government's Budget. Amendment agreed to. Clause, as amended, agreed to. Remainder of Bill-by leave-taken as a whole, and agreed to. INCOME TAX AMENDMENT BILL 1986 Bill-by leave-taken as a whole, and agreed to. Taxation Laws Amendment Bill (No. 5) 1986 reported with amendments and Income Tax Amendment Bill 1986 reported without requests; report adopted. Bills (on motion by Senator Walsh) read a third time. Senator WATSON(Tasmania) —by leave-I have this day been subject to a series of ma- licious and damaging statements from sources allegedly circulating widely within the Liberal Party of Australia. My main concern is with the Australian Broadcasting Corporation radio, but especially with the 7.30 Report on television which ran an outrageous report that I had hinted that I would be defecting to the Joh National Party. Not only have I categorically denied this with ABC journalists from both Launceston and Hobart during the day but also I wish to state that it is not in my nature to issue threats or to participate in blackmail-type tactics. I will take the decision, for better or worse, from the preselection committee which meets next Saturday. I have always been loyal to the Party; I have often been robust in debate; but my loyalty has been at both an organisational and political level. I believe that I have been severely damaged by these reports which could jeopardise my position when I face preselection on Saturday. I wish to condemn the action of the ABC 7.30 Report program which ran from 7.30 to 8 o'clock tonight, when I was denied the opportunity from 7.50 onwards when several attempts were made to have a retraction or to raise a doubt about the validity of those allegations before the program concluded. I would have thought the presenter would have at least checked the accuracy of the story with me beforehand or at least that a retraction on that program would have been afforded to me. I would also appeal to those sources which are allegedly making those very damaging statements to tell me of their displeasure with my performance as a senator face to face rather than use the highly charged atmosphere before a preselection and using an irresponsible medium. Bill received from the House of Representatives. Motion (by Senator Gareth Evans) agreed to: That the Bill may proceed without formalities and be now read a first time. Bill read a first time. Senator GARETH EVANS(Victoria-Minister for Resources and Energy)(10.25) —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 amends the Local Government (Financial Assistance) Act 1986 to implement the decision announced in the Treasurer's statement on 13 May to introduce a system of quarterly instalments for the payment of the Commonwealth's general purpose assistance for local government. This amendment will apply with effect from 1987-88. A system of quarterly instalments will enable the Commonwealth to better match outlays and receipts resulting in a saving in public debt interest payments due to a reduced financing task within each year. As the Treasurer indicated in his statement on 13 May, a sustainable recovery in Australia's economic fortunes requires governments at all levels to exercise restraint. The introduction of a system of quarterly payments to local Government complements the decisions to cut back on the Commonwealth's own purpose outlays and the decisions taken at the Premiers Conference and Loan Council meetings on 25 May 1987 to cut back the Commonwealth's general purpose payments to the States. Under the Local Government (Financial Assistance) Act 1986, the amount of general purpose assistance in 1987-88 will be escalated in line with the change in consumer price index in the year to the March quarter 1988 over the previous year. Previously, the Commonwealth has made a payment, usually during September, to each of the States and the Northern Territory, for distribution to local governing bodies of their estimated annual entitlements, that is, a single lump sum early in the financial year. The amendment provided for in this Bill will mean, so far as practicable, that annual entitlements will be paid in equal quarterly instalments. The Government proposes to make these payments no later than the fifteenth of August, November, February and May respectively. It will not be possible, however, to make a quarterly payment by mid-August in 1987. This payment will be made at the same time as in previous years, that is, normally before the end of September. The new arrangements will mean that from 1988-89, the first payment to local Government will occur at least four weeks earlier than had previously been the case. The changes in this Bill will not affect the amount being provided to local government under the Act, but there will be some loss of benefit to local Government, principally as a result of interest revenue foregone. I commend this Bill to honourable senators. Debate (on motion by Senator Kilgariff) adjourned. Bills received from the House of Representatives. Motion (by Senator Gareth Evans) agreed to: That the Bills may proceed without formalities, may be considered together and be now read a first time. Bills read a first time. Senator GARETH EVANS(Victoria-Minister for Resources and Energy)(10.26) —I move: That the Bills be now read a second time. I seek leave to have the second reading speeches incorporated in Hansard. Leave granted. The speeches read as follows- CUSTOMS TARIFF VALIDATION BILL 1987 The Customs Tariff Validation Bill 1987 provides for the validation until the thirty-first of December 1987 of duties collected in pursuance of Customs Tariff Proposals Nos. 10, 11 and 12 (1987) which were introduced into the House of Representatives on the seventh of May 1987, and Customs Tariff Proposals No. 13 (1987), and Customs Tariff (Coal Export Duty) Proposals No. 1 (1987) which were introduced on the twenty-ninth of May 1987. Under section 226 of the Customs Act 1901 the collection of duties in pursuance of customs tariff proposals is protected against legal challenge for twelve months or until the close of the session of Parliament, whichever occurs first. The introduction and passage of a validation Bill is therefore a necessary machinery measure to protect the collection of the duties which have been introduced by the proposals. The tariff changes contained in the customs tariff proposals arise from: the Government's decisions on the Industries Assistance Commission's reports on luggage and vegetables and vegetable products; the granting of duty free entry to gas barbecues and parts therefor of New Zealand origin; the variation in customs duty rates on imported petroleum products to align with changes in the excise duty on equivalent locally produced goods. The change contained in the Customs Tariff (Coal Export Duty) Proposals corrects an unintended situation where certain blends of coal currently being marketed as steaming coal were being subject to an export duty. Financial Impact Because the validation of the changes contained in the proposals merely continues their application, the Bill has no financial impact as such. I commend the Bill. EXCISE TARIFF VALIDATION BILL 1987 The Excise Tariff Validation Bill 1987 provides for the validation until the thirty-first of December 1987 of duties collected in pursuance of Excise Tariff Proposals No. 6 (1987) which were introduced into the House of Representatives on the twenty-ninth of May 1987. Under section 114 of the Excise Act 1901 the collection of duties in pursuance of excise tariff proposals is protected against legal challenge for twelve months or until the close of the session of Parliament, whichever occurs first. The introduction and passage of a validation Bill is therefore a necessary machinery measure to protect the collection of the duties which have been introduced by the proposals. Financial Impact The changes contained in the excise tariff proposals increased the duties on locally produced petroleum products because of a fall in the price of indigenous crude oil under the Government's import parity pricing policy. The change in the levels of excise was designed to offset the changes in revenue from crude oil excise and royalty. I commend the Bill. Debate (on motion by Senator Kilgariff) adjourned. Motion (by Senator Gareth Evans) proposed: That the Senate do now adjourn. Senator VIGOR(South Australia)(10.26) —I rise to bring to the Government's attention an urgent matter concerning the International Whaling Commission's moratorium on all commercial whaling until a full review has been completed of whale population assessment and whale management methods. The International Whaling Commission is currently reviewing the scientific issues involved so that it can determine how to estimate the number of whales which can be caught without endangering the whale stocks world wide. The Japanese Government has adopted a subterfuge to continue commercial whaling, despite this moratorium. This subterfuge involves issuing permits to enable the Japanese whaling fleet ships to kill 3,300 minke whales and 200 sperm whales, over a period of four years, for ostensibly scientific purposes. This action will make a mockery of the moratorium decision of the International Whaling Commission. It is unilateral declaration by the Japanese Government that it will undertake research on its own terms, using its own fleet and, of course, making use of the whales that it catches for its own commercial ends. It claims that the aim of this study is to estimate the natural mortality of whales to help solve the management problem. However, there is considerable doubt that its sampling method will provide sufficiently accurate information on natural mortality to be of use in determining maximum catch levels. In order to provide useful estimates of natural mortality one would require a considerably larger sample, of tens of thousands of whales. This, of course, is more than the existing whale populations could possibly withstand world wide. Already many hundreds of thousands of whales have been killed, and the data collected has not solved the management problem. The proposed method has been analysed by a Dr W. K. de la Mare, a member of the Scientific Committee of the International Whaling Commission. He points out the wrong assumptions made by the Japanese in their proposals for scientific research: Firstly, that the population's study will remain constant over four years; and, secondly, that the sampling will have a negligible contribution on the mortality levels of a cohort of whales. But neither of these propositions can be justified, particularly in view of the stress on whale populations which is already evident. I believe that this point is very important in bringing this matter to the notice of our Government. Other factors will also introduce sufficient bias into the experiment, so that the results will be of no practical use to anyone, and it becomes just a sacrificial exercise in the name of science-a sacrifice to the god of commercialism, profit and greed. In contrast to the attitude of the Japanese Government, I draw to the attention of the Senate the recent decision by the Soviet Government to recall its whaling fleet from Antarctic waters. The Soviet Government is to be congratulated on its decision to recall that fleet. There now seems no reason for its continuing its objection to the moratorium on whaling. I hope that it will join us in putting pressure on Japan, Iceland and South Korea which are ostensibly the only nations now continuing to pursue the whaling industry. It is extremely important that our Government should immediately enter into discussions with the Japanese Government, the Korean Government and the Icelandic Government to try to stop the slaughter of whales in our Antarctic waters, which is taking place for very wrong reasons. It is completely hypocritical to suggest that the killing of whales by Japan will in any way benefit the whale population world wide. I ask the Minister for Education (Senator Ryan) whether the Government will make representations to the governments of Japan, Korea and Iceland to support the International Whaling Commission moratorium on all commercial whaling and to forbid such a mockery of that moratorium under the guise of scientific research. I have given Senator Ryan notice of this matter, and I hope she has managed to obtain some answer. Senator RYAN(Australian Capital Territory-Minister for Education)(10.32) —In concluding the adjournment debate, I would like Senator Vigor to know that the Commonwealth Government is aware of allegations that some of the countries which have a commercial whaling tradition have sought to avoid the International Whaling Commission moratorium on commercial whaling by using the pretext of engaging in whaling for scientific research. Australia is working closely with the American Government to develop guidelines which will regulate the taking of whales for scientific purposes. It is expected that, pursuant to these guidelines, all proposals for scientific whaling will be scrutinised by the Scientific Committee of the International Whaling Commission. The Committee will pay particular attention to the question of whether the proposals for scientific whaling are a mere cover for commercial exploitation. I am sure Senator Vigor will be reassured to hear this and if he would like further information from the Minister for Arts, Heritage and Environment, Mr Cohen, it can be made available to him. Question resolved in the affirmative. Senate adjourned at 10.33 p.m. The following answers to questions were circulated: (Question No. 1722) Senator Alston asked the Minister representing the Minister for Foreign Affairs, upon notice, on 29 April 1987: (1) What was the vote of the Australian Federal Government on Resolution 390V/A at the 5th United Nations General Assembly in 1950 when it was decided to federate Eritrea with Ethiopia. (2) What were the reasons for this decision. (3) What are the Government's views on the abrogation of United Nations Resolution 390V/A by the Ethiopian Government in 1962. (4) Does the Government consider the action by the Ethiopian Government in 1962 to be legal or not. Senator Gareth Evans —The Minister for Foreign Affairs has provided the following answers to the honourable senator's questions: (1) Resolution 390A (V) was adopted by the Fifth General Assembly of the United Nations by a vote of 46 in favour, ten against with four abstentions. Australia voted in favour of the resolution. (2) Australia joined the large majority of UN members in voting in favour of the resolution because it was the agreed result of lengthy negotiations between all parties principally involved in the Eritrean question at the time. (3) UN Resolution 390A (V) provided for the establishment of the Federation of Eritrea with Ethiopia. The option of full integration was not specifically precluded under the Resolution. (4) The decision to dissolve the Federation was made by the Eritrean National Assembly in 1962. The Australian Government is not in a position to comment on the legality of the decisions of that Assembly. The attention of honourable Senators is also drawn to the answer provided by the Minister for Foreign Affairs in response to Senate Question No. 1382 on Eritrea. (Question No. 1758) Senator Puplick asked the Minister representing the Minister for Foreign Affairs, upon notice, on 1 May 1987: (1) Can the Minister for Foreign Affairs confirm the report in the Christian Science Monitor and elsewhere, of an alliance between Libya's Gaddafi and Arafat's Palestine Liberation Organisation (PLO). (2) Is this alliance, together with the PLO's repudiation of moderate Jordanian proposals, further evidence of the PLO's extremism. (3) Can the Minister confirm that the PLO has announced at the World Trade Conference Against Zionism and Imperialism in Misurta, Libya, on April 16 1987, that it will open an office soon in Port Vila, Vanuatu. (4) Will the Libyans be funding this regional PLO office in Vanuatu and is this further evidence of Libyan involvement in the South Pacific. Senator Gareth Evans —The Minister for Foreign Affairs has provided the following answer to the honourable senator's question: (1) Reports have been brought to my attention which suggest that one of the consequences of the recent meeting in Algiers of the Palestine National Council (PNC) might be closer links between Libya and the Palestine Liberation Organisation (PLO). On the strength of information available to the Department of Foreign Affairs there is nothing to suggest that the PNC meeting resulted in a PLO/Libya alliance. (2) It is not correct to say that a result of the PNC meeting was a PLO ``repudiation of moderate Jordanian proposals''. Although the PLO abrogated the February 1985 Amman accord, the resolution passed at the PNC meeting included support for the maintenance of ``the unique character'' of Palestinian/Jordanian ties and did not rule out the possibility of a Palestinian homeland in some form of confederation with Jordan. An outcome of the Algiers meeting has been, at least temporarily, a more unified PLO. There does not seem to be much evidence to suggest that the PLO has made a sudden or major shift to a more permanent extremist position. The membership of the PLO Executive Committee has been increased from 10 to 15 and representatives of the Palestine Communist Party, the Democratic Front for the Liberation of Palestine and the Popular Front for the Liberation of Palestine are now included on the Executive. However, overall control of the Executive Committee seems to remain with the Fatah factions and moderate independents (who have always supported Fatah). (3) No. (4) The question is speculative. (Question No. 1763) Senator Watson asked the Minister representing the Minister for Social Security, upon notice, on 4 May 1987: (1) Is it a fact that foreshadowed increases in pension payments scheduled for May 1987 will be delayed by one month. (2) Why does the Government appear to pursue a policy of discrimination against the most disadvantaged in the community. Senator Tate —The Minister for Social Security has provided the following answer to the honourable senator's question: (1) As part of last year's Budget measures, the Government decided to defer pension indexation increases by six weeks. This deferral has meant that adjustments which formerly took place six monthly in May and November are now due in June and December each year. (2) In the period from its taking office to December 1986, the Government has increased the standard rate of pension by more than 6 per cent in real terms (compared to about 1 per cent over the seven years of the previous Government). In March 1983 the pension was 22.7 per cent of average weekly earnings. By December last year we had increased that to 23.8 per cent. Despite the need for restraint in the current difficult economic circumstances, the Government continues to place emphasis on sustaining the living standards of Australian pensioners. Senator Walsh —On 12 November 1986 (Hansard, page 2012) Senator Dame Margaret Guilfoyle asked me, as Minister representing the Treasurer, a question without notice concerning clarification of the estimated revenue from the fringe benefits tax and the substantiation requirements. The Treasurer has provided the following information in answer to the honourable senator's question: The figure of $775 million was the full year revenue gain for fringe benefits tax (FBT) and substantiation, as estimated at the time of the 1986-87 Budget. It was anticipated that this figure would be reached after four years of operation of the substantiation provisions. The $775 million was made up of $575 million from the FBT and $200 million from the substantiation provisions. The estimate of $105 million revenue gains from substantiation, contained in the Treasurer's Statement of 19 September 1985, related to the estimated revenue for 1987-88. It is therefore not comparable to the $200 million figure mentioned above. The amendments to the FBT and the income tax substantiation requirements, announced on 29 October 1986, reduced estimated full year revenue for the FBT and substantiation to $700 million. The estimated reduction of $75 million was spread between the FBT and substantiation categories. On the basis of revenue collected from the first two FBT instalments it is clear that FBT revenues will be higher than expected earlier, although firm estimates are not available at this stage. Senator Walsh —On 5 December 1986 (Hansard, page 3498) Senator Macklin asked the Minister representing the Minister for Arts, Heri- tage and Environment a question without notice concerning sand mining at Shelburne Bay. The Treasurer has provided the following information in answer to the honourable senator's question: The Prime Minister announced on 20 March 1987 that the Government had decided on environmental grounds not to approve the Shelburne Bay silica sand proposal. Senator Walsh —On 25 March 1987 (Hansard, page 1296) Senator Boswell asked the Minister for Industry, Technology and Commerce a question without notice concerning the relative treatment of goods purchased by independent retailers and by national chain retail stores under the wholesale sales tax. The Treasurer has provided the following information in answer to the honourable senator's question: Sales tax is payable on the value of goods at the point of last wholesale sale. The question concerns the situation where a retailer purchases taxable goods direct from a manufacturer, this sale being the relevant transaction for levying tax. The Government accepts that this design feature can advantage retailers who purchase direct from manufacturers, rather than through wholesalers and may advantage those retail chain stores which vertically integrate upstream by performing wholesale functions themselves. In its Draft White Paper on Reform of the Australian Tax System, the Government identified this as one of the weaknesses inherent in a WST. The only certain method of eliminating the problem to which the senator refers would be to replace the WST by a retail sales tax or a VAT. However, these taxes also are not without their disadvantages.