1999-05-143912SENATE506301999-05-14The PRESIDENT(Senator the Hon. Margaret Reid) took the chair at 9.30 a.m., and read prayers.Miscellaneous50635063The PRESIDENTThe PRESIDENT10000PON/A10—Before proceeding with business, I wish briefly on behalf of senators to say to Ric Whittaker, `Well done and best wishes as you leave the Joint House Department.' He has been with the department for more than 20 years, having started in the Old Parliament House as an assistant mechanic in charge of air-conditioning. He has moved through various supervisory jobs in the trades area and since December 1994 has been the Director of Maintenance Services in the Joint House Department. We have all benefited from his skills, even if we have not realised precisely that we were benefiting.He was involved in the secretariat of the Joint Standing Committee on the New Parliament House, and he led the team that commissioned the systems and services in this building. He has been a very committed worker and has always given of his best to the parliament and been committed to it. He leaves with the best wishes of everybody in his department. He leaves work today. On behalf of senators, I say to Ric Whittaker, `Thank you for what you have done for the parliament, and best wishes.'UNKNOWNHonourable senatorsHonourable senators—Hear, hear!Committees5063506310000PRESIDENTThe PRESIDENT—I have received a letter from the Leader of the Opposition in the Senate nominating a senator to be a member of a committee.Motion (by Senator Kemp)—by leave—agreed to:That Senator Sherry be appointed a participating member of the Economics Legislation Committee. Bills5063r7765063Bill received from the House of Representatives.Motion (by Senator Kemp) agreed to:That this bill may proceed without formalities and be now read a first time.Bill read a first time.506309:33:005063Kemp, Sen RodSenator KEMPWW4VICLPAssistant Treasurer10—I move:That this 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—The purpose of this bill is to repeal the Tradesmen's Rights Regulation Act 1946.In 1998, a detailed review of the Tradesmen's Rights Regulation Act was undertaken pursuant to the Government's Legislation Review Schedule.The need to review the act was first identified in 1995 by the then Labor Government as part of its development of a regulation review timetable following on from the national Competition Principles Agreement signed by all governments in April of that year.The Legislation Review found that the Government's training reform process, in particular the development of Training Packages and the introduction of the Australian Recognition Framework, has removed the ongoing need and rationale for the Tradesmen's Rights Regulation Act.The report of the Legislation Review concluded that Registered Training Organisations established under the Australian Recognition Framework are better able to provide trade skills assessment services and there is no longer any need for the Commonwealth to do so. The report recommends that the act be repealed.Madam President, 1996 saw the fiftieth anniversary of the Tradesmen's Rights Regulation Act. At that time I noted that for fifty years, it had played an important role in helping to meet Australia's trades skill needs, predominantly in the metal and electrical trades.After the Second World War it aided in the task of re-settling returning troops into the civilian workforce and reconstructing Australia's economy. It also allowed people who developed their trade skills in industry during the war to receive the appropriate recognition for those skills.By 1951 it was considered that the legislation had achieved its immediate post-war objectives and the act was amended to also provide for the recognition of the trades skills of migrants after they arrive in Australia. Since then, newly arrived migrants have been the main client group seeking to have their skills recognised under the legislation.The value of the Tradesmen's Rights Regulation Act has been the nationally accepted trade qualification issued under it. Until the introduction in 1998 of the Australian Recognition Framework, there was no alternative national mechanism due to a lack of uniformity in trade training and recognition systems at the state level.Consequently, the act provided a means for the national recognition and mobility of skills that did not otherwise exist.The importance of the Tradesmen's Rights Regulation Act in this regard was reinforced by a review of the act undertaken in 1991 by Mr B H Tregillis. The Tregillis review recommended that the act should continue "until national standards and processes have been developed and unless and until it can be demonstrated that a more effective mechanism [than the act] can be put in place."The conditions for repealing the act identified by the Tregillis review have been met by the development of Training Packages and the Australian Recognition Framework.In November 1996, Commonwealth, State and Territory Ministers for Vocational Education and Training endorsed the National Training Framework.The aims of the National Training Framework are to provide a more flexible and simpler regulatory environment for training and to underpin the user choice arrangements of the Government's New Apprenticeships initiative.The National Training Framework comprises two elements—Training Packages and the Australian Recognition Framework.Training Packages are developed by industry to provide the basis for the delivery of training and the assessment of skills on a consistent national basis.The Australian Recognition Framework commenced on 1 January 1998. It is a new set of administrative arrangements for the flexible but consistent national recognition of skills against the benchmarks established by Training Packages.The Australian Recognition Framework devolves the delivery of training and the issuing of qualifications to Registered Training Organisations which operate under a quality assurance framework administered by the States and Territories. Madam President, at 30 June 1998 there were 195,500 apprentices and trainees in training throughout Australia. More than 60,000 of these were in trades covered by the Tradesmen's Rights Regulation Act. The Australian Recognition Framework governs the way these and future apprentices and trainees are trained and have their skills recognised.The Legislation Review notes that the importance of the Tradesmen's Rights Regulation Act has been declining in comparison to the domestic training system, and in absolute terms for some time. In 1997/98 there were only 1,218 applications for trades skill recognition under the act.The Legislation Review notes that much of the recent decline in demand for recognition under the act reflects the changes that have occurred in the domestic training system.Madam President, it is appropriate that the Australian Recognition Framework, which governs the operation of the domestic training system for nearly 200,000 apprentices and trainees, also applies in the recognition of the trades skills of little more than 1,200 applicants under the Tradesmen's Rights Regulation Act.The Legislation Review concludes that the services provided under the act can now be delivered on a nationally consistent and competitive basis by Registered Training Organisations under the Australian Recognition Framework, and that the continuation of the Tradesmen's Rights Regulation Act would be inconsistent with the training reform agenda which is supported by all levels of government and industry.Madam President, the Legislation Review committee consulted widely in the course of the review, and the action it has recommended is strongly supported; including by the Australian National Training Authority, state and territory government training authorities, and the Australian Chamber of Industry and Commerce.In its comments on an interim report circulated by the review committee, the Federation of Ethnic Community Councils of Australia said that it "appreciates that the time has come to repeal the [Tradesmen's Rights Regulation] Act".Madam President, the Government accepts the Legislation Review's findings.This is not about cost savings. The services provided under the Tradesmen's Rights Regulation Act have been increasingly self-funding since the introduction of fees by the Hawke Government in 1989, and the savings accruing to the Commonwealth from the act's repeal will be less than $500,000 per annum.Madam President, the Tradesmen's Rights Regulation Act has played a valuable role, but with the advent of recent domestic training reforms that provide a more appropriate and efficient alternative, that role has come to an end.This bill constitutes the necessary first step in implementing the recommendations of the review. The second step is the promulgation of Regulations to ensure a smooth transition to the new arrangements and, in particular, safeguard the rights of persons who currently have an application in the system.A communication strategy will ensure that all stakeholders fully understand both the transitional and new arrangements.Madam President, in closing, I would like to acknowledge the contribution made by a very great many people over the past 50 years to the operation of the Tradesmen's Rights Regulation Act.I commend the bill to the Senate.Ordered that further consideration of the second reading of this bill be adjourned until the first day of sitting in the winter sittings 1999, in accordance with standing order 111.Bills5065A message received from the House of Representatives agreeing to the following bills without amendment: Ozone Protection Amendment Bill 1998 [1999] National Health Amendment Bill (No. 1) 1999 Bills5066r703Billsr667Billsr666Billsr702Billsr699Billsr698Billsr664Billsr660Billsr658Billsr657Billsr701Billsr663Billsr659Billsr700Billsr661Billsr754Billsr755Billsr761Billsr765Billsr763Bills5066r764Billsr757Billsr760Billsr758Billsr759Billsr756Billsr7625066Consideration resumed from 13 May.A NEW TAX SYSTEM (GOODS AND SERVICES TAX) BILL 199810000CHAIRMANThe CHAIRMAN—The committee is considering Democrat amendments 2 to 16 on sheet 1353 revised, relating to the GST treatment of food in respect of the A New Tax System (Goods and Services Tax) Bill 1998 . The question is that the Democrat amendments be agreed to.09:34:005066Woodley, Sen JohnSenator WOODLEYHX5QLDAD00—The Democrats are in the business of delivering the economic benefits of tax reform to all people. However, we want to ensure that the new tax system is fairer than the current system, because we believe the current system is also flawed, and that is especially so for low income earners. As we have said before, the best and permanent way to compensate families for the adverse effects of a GST is to ensure that it does not deliver adverse effects in the first place. A food-free GST will minimise these adverse effects. We have been arguing that it is fairer to exempt food than to compensate people for having to pay for it. Compensation does not work, as we have said, because its effect will be eroded and the government would be compensating for something that is fundamentally unfair in the first place.The case for zero rating food is about equity, health, employment and economic and international best practice criteria. I want to address this issue from four particular points of view. There are four statements about the GST on food that we believe to be critical. They are: that a GST on food would be particularly damaging to remote communities; that a GST on food would be unfair to low income earners; that a GST on food would not be conducive to good eating habits; and that a GST on food would not be good for job retention in rural food production.I would like to concentrate on the disadvantage to remote and rural communities and the issue of job retention in rural food production. Let us talk, first of all, about the issue of remote communities. It is known that food in remote communities is already far more expensive than it is for the rest of us. When we look at remote Aboriginal communities, we find very low average incomes. These two issues combine to affect very seriously the nutrition of people living in those communities.I visit communities regularly and, as I indicated earlier in my speech in the second reading debate, particularly was shocked to visit Aurukun on the western side of Cape York last year in November. Having visited that community over a period of 20 years on a number of occasions, I was shocked to see the decline in the social and environmental health of the people there. Compared with what I saw 20 years ago, when there were many problems, what is happening there at the present time is quite devastating.Because incomes are so low in these communities, a very high proportion of the income is spent on food, and these people are already constrained by a monopoly of supply and delivery and significant lack of choice. As a significantly disadvantaged group already, they would be further disadvantaged by a GST on food, and it will seek only to exaggerate the divisions not simply between rich and poor but between city and rural dwellers.There is another issue—that is, the loss of jobs in rural food producing areas. Both the Murphy and the Monash models, when they examined the effect of applying a GST to food—EP5FERGUSONSenator Ferguson—You weren't there, John.HX5Woodley, Sen JohnSenator WOODLEY—I can read. They predicted a significant loss of jobs across the agricultural sector—more bad news for regional and rural communities. I have yet to see the model that tells us that you can apply a GST to food and not have job losses in these fresh food producing areas. Further, the Murphy model showed that zero rating of food would double the positive effect of tax reform for agriculture.Now I want to record what the various agricultural bodies have said about the tax package, particularly about the GST. It is true that the National Farmers Federation has called for a broad-based GST and strongly opposes any narrowing of the base to which the GST applies. But there are food producing sectors which are not members of the NFF or, even if they are, disagree with the position the NFF has taken. I would point out that the NFF position was fixed last November before any of the Senate committees had met and before any of the evidence had been examined.WW4KEMPSenator Kemp—Like your position.HX5Woodley, Sen JohnSenator WOODLEY—That is not true, Senator Kemp, as you know very well.Senator Kemp interjecting—HX5Woodley, Sen JohnSenator WOODLEY—I am glad you acknowledge that, because you are a fair person. The NFF does not and cannot represent all sectors of agricultural production, so let me tell you what some of these groups have said. The Australian Fresh Stone Fruit Growers Association reported grave concerns for the effect on their industry. They warned:There is a very real risk of the Federal Government inadvertently steering general community consumption away from fresh fruit and vegetables towards manufactured snack foods because of the proposed change in tax and associated price initiatives. The government's own package indicates that the GST will result in much higher price increases for fresh food products over junk food. The estimation is somewhere between six and seven per cent—three times that of the economy as a whole.The Australian Beef Association submitted that the GST would reduce domestic beef sales by nine or 10 per cent. The Dairy Farmers organisation called for milk to be zero rated as one of the staples or necessities of life. A significant submission came from the Mackay Fruit and Vegetable Growers Association, and we hear the same story from the banana sectional group of the Queensland Fruit and Vegetable Growers. The Mackay Fruit and Vegetable Growers Association argues:There should also be consideration given to the diet of Australians and appropriate exemptions dealt out to those foods which are essential for a person's diet and which lead to a good and healthy life.Dr Graeme Cole told the inquiry:Producers will suffer severe economic losses due to reduced returns. The Government which imposed such a tax would be seen to be uncaring of its effect on the poorer section of the community despite protestations that compensation is being considered. The Government would also be seen to be uncaring of the effect on the bulk of the primary producers of Australia.Increases in prices of fresh fruit, vegetables, meat and cereals—in short, fresh food—will inevitably affect consumption patterns and lead to a reduction in domestic sales. In the short term, this will lead to the loss of 10,600 jobs in food and agricultural industries, the reduction in incomes of rural producers in many sectors, the loss of 2,500 jobs from outer rural regions to the cities and increased compliance costs for farmers. By contrast, zero rating food doubles the long-term economic benefits to agriculture, increases consumption of fresh foods due to lowering of prices and generates extra foods in food and agricultural industries.However, I do not need to quote simply from the Senate report because, since the Senate report was handed down, we decided that it would be important to go back to those groups that had made submissions to the inquiry and check whether their position was still the same. I want to read to you some of the letters we have received recently which confirm again the position that these groups took at the Senate inquiry. Dairy Farmers called for GST exemption on white milk, and the press release reads:According to Mr Allan Tooth, the managing director and chief executive officer of the Dairy Farmers Group, the negative impacts associated with imposing a GST on white milk clearly outweigh any immediate financial gains. Dairy Farmers strongly believe that these reasons necessitate the preferential treatment of white milk, especially a GST-free status for white milk. The implications for the dairy industry of the government's proposal for taxation reform cannot be taken lightly, Mr Tooth said.The Public Health Association of Australia also confirmed what they had said at the inquiry, and I briefly quote:The Public Health Association of Australia supports the Democrats stance on food and the GST and urges Senator Lees to continue to fight to leave food GST free. Price is one of the most important factors contributing to food choice.The Australian Consumers Association said:The Democrats' revamped proposal to exempt fresh food from the GST is a positive way of encouraging healthy eating.The Australian Council for Health, Physical Education and Recreation said:The . . . Australian Democrats' stance on GST exemption for healthy basic foods should be applauded. Their stance encourages and provides incentive for Australians to make healthy food choices.The Australian Beef Association confirmed what they said at the Senate inquiry:The Australian Beef Association supports the Australian Democrats' fight to exempt fresh food from the GST. ABA documentary evidence supports our belief that a 10 per cent rise in the retail price of beef could reduce consumption of this essential food product by 11.8 per cent.The Mackay and District Fruit and Vegetable Growers Association confirmed what they said at the Senate inquiry. Most of these letters are dated late April; this one is dated 21 April. They said:Our association is pleased to support the Australian Democrats' revised tax policy for a zero rating on basic foods. The proposed system, in our view, would return the social equity which would be lost upon a general GST on all foods. Fresh primary produce has faced in excess of a decade of rising costs of production and stagnant or reducing returns. We as producers take extreme pride in supplying our fellow countrymen with the cleanest, greenest produce in the world. Let us not overshadow that pride by making our produce the highest taxed in the world.One of the small business groups reported on a survey they did:Fifty-five per cent of the people surveyed believe the Senate has a mandate to modify the tax plan, the latest Yellow Pages small index has found.It went on to say:Forty-eight per cent said food should be exempted while 42 per cent said it should not.The New South Wales Chamber of the Fruit and Vegetable Industries in a long letter to Senator Meg Lees dated 11 May—this is the most up-to-date letter that I have—also supported the stand taken by the Democrats. I will briefly read the introduction:The New South Wales Chamber is most heartened by the stand you have taken concerning the GST, particularly your position on taxing basic food items such as fresh fruit and vegetables.In the conclusion to the letter they said:The best solution is to have fresh fruit and vegetables as basic food items zero-rated or GST-free. This solution would overcome the problems outlined above and will ensure that our industry can continue to provide the Australian community with the best fresh fruit and vegetables in the world at the most affordable prices.The Democrats, in presenting these amendments to the chamber for consideration, have looked at it from many different perspectives, particularly from my perspective of the effect on the nutrition of people in remote rural and Aboriginal communities and also the effect on jobs in many of the fresh food industries. We are not only putting at risk the health of the people in those Aboriginal and other remote communities but also threatening jobs within many of the industries which supply fresh food for Australian families. I believe for that reason we cannot allow this tax package to pass without these amendments. If we do, then I believe we will be condemning those remote communities to loss of health and nutrition, and we will certainly be causing loss of employment in those fresh food producing industries in Australia which are so critical to the health of this country and so critical to the survival of many rural communities. (Time expired)09:49:005069Murray, Sen AndrewSenator MURRAY3M6WAAD00—I want to briefly follow on from a question I put to the minister yesterday. Although he did not respond formally, I noticed in reading the Hansard that he put in an interjection. I asked why it was that the Prime Minister, John Howard, the Treasurer, Peter Costello, and the Assistant Treasurer, Senator Roderick Kemp, had all supported food not being taxed in 1993. I noticed in the Hansard that the interjection was: `Well, that was because we lost the election,' so you changed tack. I thought that was interesting, and I went and did a little bit of statistical work.In 1993 when, under John Hewson's leadership in the House of Representatives, they put to the electorate a policy that food would not be taxed under a GST—you might like to write this down because they are fascinating figures—John Hewson received 42.3 per cent of the primary vote. In 1998, going to the electorate with a view that food should be taxed under a GST, John Howard's coalition got 39.5 per cent of the primary vote. So in fact you lost 2.8 per cent on your argument because you changed tack on the food issue. In the Senate the figures are even more interesting. In 1993, you got 44.7 per cent of the vote when you went to the community asking for food not to be taxed, and in 1998 you got a miserable 37.7 per cent. You lost seven per cent because you asked for food to be taxed.I know that the coalition are very clever strategists, so you have to ask yourselves: why would they adopt a policy which they knew would lose them seats and votes? The answer is simple: big business donations. It must have been for financial reasons. It must have been that the big business groups, who are insisting that food be taxed, wagged your tail—otherwise, why would you drop a policy which delivered such a better vote outcome in 1993 than the one delivered in 1998? Why would you lose all those seats unnecessarily?I thought I should dig up a press release issued by the then Deputy Leader of the Opposition and shadow Treasurer on 18 December 1992. This is what the coalition said, fully supported by John Howard, Peter Costello and Senator Roderick Kemp:The cost of feeding the family will fall dramatically under a Coalition Government, with basic foods free of GST! . . . There will be no GST on supermarket purchases such as fruit and vegetables, milk products, margarine, bread, eggs, chicken, meat, pure fruit juice, oils and fish.7L6HOGGSenator Hogg—Who said this?3M6Murray, Sen AndrewSenator MURRAY—This is the coalition. Isn't this delicious? In 1992 John Howard, Peter Costello and Roderick Kemp went to the election fully supporting no GST on food. They got a better vote in 1993 than they did in 1998 because they went with that policy. Yet you sacrificed the Australian people, those seats and those members because big business said, `Don't do it, otherwise we won't give you the dough.' What other reason could there be? Why would you sacrifice those poor people?On 13 March 1993 in his article in the Australian John Hewson—a very honest, right-wing leader of the coalition—said:We will also make sure that families get a fairer deal. With basic food exempted from the GST, the average cost of food will fall. With education and health excluded from the GST, the cost of these services will also fall.John Hewson, the leader of the coalition at that time, fully supported by John Howard, Peter Costello and Roderick Kemp, in a transcript of a doorstop media conference in Sydney on 18 January 1993, was asked the following question:. . . can the electorate have any faith that you won't change that plan again?Mr Hewson replied:I believe they can because we've put out the detail. We've always opened to listen to people, and we do. We respond. When we hear an argument like the one that was put to us before Christmas about us being unfair, we listened and we excluded food from the GST. So now we can go to this election offering people cheaper food as well as cheaper petrol and cheaper education and cheaper health. But the basic structure of Fightback!, the structural integrity of Fightback!, has been maintained and it will be maintained and it will be implemented.Yet this government, Mr Howard and Mr Costello do not listen and cannot listen to the people, so they have not changed tack. They argue in complete contrast to their former argument that taxing food would destroy the integrity of their ANTS package in contrast to Fightback.Minister, I conclude from this that you and your lawyers' government will argue to whatever brief you are given. You know it is unfair, but your brief is to argue that food should be taxed. Formerly in 1993 you and your government recognised that food should not be taxed. You fully supported it. You knew it was fairer, and you are insisting on implementing a miserable, unfair, malicious and mean policy of taxing Australians' basic food.The essential issue is this: you cannot get compensation if you do not pay tax, because you cannot get the tax cuts if you are not a taxpayer, and you cannot get the benefits of social security if you are not in the social security system. There are well over one million people who fall between the cracks. This is an equity issue, this is a fairness issue, and in 1993 your coalition, you personally, John Howard personally and Peter Costello personally understood that and supported John Hewson's desire not to tax food. You went to the people with it and got a better vote than you got this time.You have now adopted an unfair policy. Why? Because big business says do it. The churches don't say do it; the charitable organisations don't say do it, the Australian people don't say do it and the polls don't say do it. No-one with a heart says do it, but you want to do it because big business says you must. I believe that is the fundamental moral flaw in your argument. You said yesterday that this is not an equity issue. I am telling you it is a fairness issue and you have changed tack since 1993.You have always insisted that a GST—a consumption tax—is good and you have held true to that for 20-odd years as a party. I respect that policy position, but you have changed tack on the food issue and I want to know why. I asked that question deliberately yesterday and I have now done the research. You said it was because you lost the election. But you did not lose votes—you gained votes when you had food out. You got a better vote in 1993—a much better vote in the Senate and a better vote in the House of Representatives—when you went to the people and said that you did not want food taxed under a GST. That is all have to say at this time.09:58:005070Brown, Sen BobSenator BROWNQD4TASAG00—The Greens totally oppose the GST right across the board, and the argument used by Senator Murray about the indefensibility of having a GST on fresh food also applies to many other items on which a GST will apply and on which the Democrats agree that a GST should apply.A difficulty arises here because, once you start supporting a GST, you run into the problem of where to draw the line. Senator Murray quite correctly says that the government has changed tack on the food issue, but so have the Democrats. The Democrats went to the last election on a policy of exempting food, but since then have changed that policy to exempting fresh food, but not processed food.The problem still arises for the populace that there is a trend in Australia—right across the income spectrum—towards all of us eating more processed food. This does not just mean food that has been cooked in expensive restaurants, but such things as breakfast, lunch and dinner for families. I accept Senator Murray's asseveration yesterday that it is beyond the Democrats to do modelling on this matter; it is the same with the Greens. Nevertheless, the reality is that Australians, like the rest of the world, are moving more and more towards eating outside their own kitchens. As this process proceeds, the GST formulation that the Democrats are putting forward will catch more and more people paying GST on what they consume—on the food they eat in their ordinary lives—into the future. In other words, the Democrats' formulation is regressive in that it would see the GST place more and more of a burden on the pockets of all Australians—that includes poor Australians as well as wealthy Australians—if the current trend towards eating more processed or cooked foods proceeds, and everything points to that being the case.The Greens have opposed this GST legislation because of those difficulties. Before the last election we did a lot of work on the GST and its impact on society. In fact, we had already put a year's study into the GST before the election and we went into the election quite firmly opposed to the GST—as did the Labor Party at the time. But, as I said yesterday, a problem has arisen in that the Democrats have said, `We can effectively make the GST consumer-friendly. We can reformulate it so that it will be easier on the average Australian—particularly those on low incomes.' The problem is that I do not think you can do that. The real difficulty with this process is that that allowed the electorate to believe during the election that a nice GST, which was not going to hurt the pocket, could be formulated in the Senate after the election. We clearly see here today that that is not the outcome that we are going to get.Without reflecting on this place, we are here debating the GST this morning in the absence of the Independent senators. It may be that they are having a cup of tea. I do not know. But, in reality, I would think that the lines are running hot between the Prime Minister's office and other ministerial offices and those of Senator Harradine, if not Senator Colston. The minister might be able to confirm whether that is the case or not—although I think he may be out of the loop, because there are bigger things at stake.But here we are having a GST formulation at least mooted between entities outside this chamber, which means that whatever agreement is being made out there is going to be the one adopted in this chamber, regardless of the debate we are entering into at the moment. That is the problem for the Democrats, because that was always going to be the case. Having effectively said to the Australian people, `We can make the GST friendly to you,' the reality is that that is not the case today when we are facing an outcome on the GST. We will see what happens to the GST on food. But I want the Democrats to accept the responsibility if we get a package in which the GST is on food but there is some other compensatory measure negotiated with the government by Senator Harradine and Senator Colston. That is an outcome that they will have helped de facto to produce.The Greens' record will always be clear as having opposed this process from the outset because we could see not only the alternatives but the political dynamic that once you put your toe in the water by saying, `Let us try to have a GST that applies to this or that,' you will ultimately end up with a GST whether you like it or not. The Australian population will then pay the penalty, and what a penalty it will be. It is going to mean an across-the-board tax inevitably increasing on many of the basic necessities of life, while the wealthy and powerful escape the consequences.There is no debate taking place in here today about the fact that 50 per cent of the multinational corporations in this country pay no tax. If we were debating that, and if that is what the government were proposing, then I, as an Australian Green, would be in full support. I would go to the Prime Minister's office to debate and endorse such a move any day.3M6MURRAYSenator Murray—He can serve you green tea.QD4Brown, Sen BobSenator BROWN—Yes; and we will have a cup of green tea, if necessary, to move towards such an objective. I can tell the Prime Minister that that would be a very popular move with the Australian electorate. It may not be popular with the people who fund the Liberal Party, but it would be popular with 18 million Australians. Today, however, we have got a situation where 18 million Australians are going to pay this new tax impost while those people who fund the Liberal Party are going to continue to find ways of getting around it—and they will find the means of getting around the GST.I have spoken with people in the Taxation Office about this. There is a general belief that the GST is going to end tax avoidance and catch those people who do not pay taxes. That is not the case. Tax systems are inherently able to be circumvented, one way or another, to some degree or other. But the people who best circumvent them are the people who have the money and the smart lawyers. Average people, who are going to pay GST on their cooked food at the local cafe or store are the very people who will be caught, even by the Democrat amendments that we have before us today.The other problem that is inherent in this for the Democrats is how do you ensure, if you support a GST being brought in on most things, as the Democrats do, that you will not then have a future government moving to extend the GST to the very things that you are keeping clear of it in these amendments, such as fresh food? I would certainly welcome Senator Lees or Senator Murray giving some assurance to the chamber that they know how to stop a future government from putting the GST onto fresh food, even if we did have the legislation altered so that fresh food would be zero rated according to this amendment. You cannot, of course, give such an assurance.Once you undertake this process, you are on the slippery slope of a future government being able to put the GST on fresh food and also a future government being able to raise the rate of the GST with the states wanting an extra slice further down the line—they would be quite ready and complicit in such a move. That is why the Greens have opposed the GST all the way down the line. All the accolades that Senator Woodley read out from various groups saying that it would be great were milk not GST rated, and so on, apply to a much wider range of primary producers and manufacturers in supporting the Greens' stand, which is similar to that of the ALP.The one difference is that never, under any circumstances, have we entertained having the real policy of a GST because right from the outset our studies said that it would be an unfair tax and out of date. We ought to be debating more modern alternatives, particularly catching the multinationals. We should be looking at the Greens' alternative which is up with modern European practice of ecotaxes. This is a much better and fairer way of raising revenue, contributing not only to a fairer society in the future but to a much better lifestyle for the average Australian.10:10:005072Cook, Sen PeterSenator COOKRF4WAALP00—It is desirable, if at all possible, that we bring this amendment to a vote in the Senate this morning. Therefore, my contribution will be brief. I stated the Labor Party's position on this amendment in my earlier remarks. Simply put, it is that we will be opposing the amendment because we oppose the GST. We do not wish to simply modify a GST which would ensure that a GST comes into being, albeit a slightly less onerous one, then have a tax system in which it is impossible to remove a GST and then be faced with a situation that the GST inevitably will rise, as it has everywhere else. Inevitably, as everywhere else, the base of it will spread further—areas of exemption now before us will be included in future—and the inequities and unfairness, which cannot be sustained and are proven to be false, will get worse as time goes on. You have all heard the Labor Party position on that.We are faced here with a mild dilemma of conscience. We agree with what the Democrats say about removing food and it would make for a fairer tax package if it were out. But the tax package would still be unfair and it is to that principle that we will be directing our attention in not supporting the amendment. At the close of play yesterday, I did ask the minister a series of questions and I would be grateful if the minister were in a position to answer them.10:12:005072Lees, Sen MegSenator LEES8U4SAAD00—I also hope that we are able to bring this to a vote some time this morning. I will be brief in summing up the Democrats' reasons for pursuing this issue. The key point is that, if we are able to remove food from the GST, we remove 75 per cent of the need for compensation. Yesterday we touched on most of what Senator Brown raised, but if I could go back to one point which needs to be clarified: we are not just talking about fresh food; we are talking about a range of processed foods. Indeed, the line is drawn when we come to prepared meals. Virtually everything that is zero rated in the current wholesale sales tax system, plus a few extra things—we have included fresh orange juice, for example, in our zero area—is zero rated in our proposal.The reason we are persisting with this and will continue to persist, even if these amend ments go down today, is that taking food out makes the system far fairer. It will also assist in the creation of some 8,000 to 12,000 jobs—that is from the modelling done which was put before the committee. Senator Woodley has touched on where many of those jobs are to be found and that is out in our agricultural communities. Not taxing food still delivers all of the economic benefits of the GST but, as we have heard time and time again, without the unfairness.This brings me to some points that Senator Kemp raised yesterday. I find it quite extraordinary that he is still struggling with this issue of equity, claiming that somehow we have not made our point on the equity issue. I ask him: has he not seen all the work put together by what is an historic alliance, a very broad alliance of church groups, charities, community groups and consumer organisations? Those joint statements make it very clear that we are not the only ones saying that the way to get a new tax system that is fair and reasonable is to have one that does not tax essential foods.This alliance includes Anglicare, the Australian Catholic Health Care Association, Australian Catholic Social Welfare Commission, the Consumers Association, the Council of Social Services, Pensioners and Superannuants Federation, the Australian Youth Policy and Action Coalition, Brotherhood of St Laurence, a range of Salvation Army groups, Secretariat of National Aboriginal and Islander Child Care, Society of St Vincent de Paul, Uniting Church Community Services and the Women's Electoral Lobby. Anyone who suggests that we are somehow not representing a very broad cross-section of concerns in this community simply has not been listening.If we do not tax food, we will join the 23 out of 27 OECD countries which treat food as a special case—either not taxing it or taxing it at a lower rate. As Senator Kemp has already been through with us, there are a number of countries that do tax it at a lower rate—which completely kills your argument for excluding food on simplicity grounds. These countries actually have a more complex system than the one we are suggesting. Imagine what a GST with 10 per cent on everything but with two or three per cent on food would do to compliance costs for small business compared to zero rating food.Not taxing food will benefit everybody, contrary to the argument that, because we are paying for the food out option by reducing tax cuts, somehow those who are wealthy will benefit more than those who are at the bottom 40 per cent of the income level because they also buy fresh fruit food and what can be described as the essential foods, the processed foods—all the tinned foods, the dairy products, virtually everything in the frozen food section of the supermarket, short of prepared meals. The argument is that, regardless of income, you buy these goods and somehow the wealthy will benefit from no tax on food, but I remind Senator Kemp yet again that the way we are paying for this is by reducing the tax cuts for the wealthy—in other words, we are taking $30 or $40 from them but giving back $10 because they will not be paying tax on their essential groceries.One of the things the government has completely overlooked—and if this bill eventually gets through with food in it it will certainly be brought to their attention within the next 18 months—is that if we can take food out we actually get the community on board. Far more Australians will be comfortable about tax reform, about the changes you are making, if we can keep food out and they can see up-front, immediately, once the GST goes in, that their basket of groceries is a little cheaper rather than being significantly more expensive. If you look at the recent polls, 67 per cent of the population support keeping food out of a GST, about another 20 per cent want it in, and the rest do not care. I think the government is running an enormous political risk pressing ahead with this obsession for keeping food in on the grounds of simplicity when it has undermined that argument by taking out health and education in particular.In short, rather than unravelling the tax package, our amendments will make it more attractive, more jobs friendly, fairer and more robust. I recommend that the government starts listening not just to the Democrats but to those in the community who want food left out of the new tax system.10:17:005074Kemp, Sen RodSenator KEMPWW4VICLPAssistant Treasurer10—I will respond to the range of comments that have been made unless there is anyone else who wishes to add to the debate. I am delighted that we all feel that this debate must now hopefully be brought to an end. We have had a very good debate in the chamber. It has lasted some hours. The overall debate on the bill is now reaching over 40 hours and already it is one of the most lengthy—8U4LEESSenator Lees—If you keep reminding us, we'll keep going.WW4Kemp, Sen RodSenator KEMP—I just make the point and I think it is an important point. I am making the point that a lot of the issues in this bill have been very extensively canvassed. I think it is an important point to make and no-one is saying that this is being rushed through—in fact, no-one could possibly argue that this is being rushed through, I would think.I turn to some of the comments that have been made, some of which overlap. In Senator Woodley's contribution he argued, among other things, that we should zero rate food because this is world's best practice. I would have to say that practically none of the evidence given to the committee suggests that this is world's best practice. All the expert modellers that were brought before the committee, including those chosen by the non-government parties, indicated that food should not be zero rated. It is one thing to have a committee—and I think it is important that we listen to the evidence that went before that committee—but the government takes considerable comfort from the fact that the overwhelming weight of evidence before that committee from the experts called by all parties supported, by and large, the government's position that world's best practice in effect meant that you would not zero rate food.I always listen to Senator Murray with great interest. He always seeks to make a serious contribution but I would have to say, Senator Murray, that that was one of your less serious contributions. It was a bit of a filibuster, I think one could say. But there was a serious point raised that I want to tackle. It is not your usual style to talk in this manner—that somehow we had adopted this policy because of pressure from big business or whatever. I do not think you believe that. The explanation for why this policy was adopted is that after a lot of intensive study and a lot of looking around to see what happened elsewhere in the world we came to the conclusion that this was world's best practice, we came to the conclusion that we would establish a tax system which would set a new standard. So we looked at the experience of other countries, we looked at the problems in other countries, and we developed a tax system which we believe has taken note of the experience elsewhere in the world and has made sure that Australians have a world-class tax system.In this debate we can all raise our voices and allege that people have not addressed particular issues, but I repeat, Senator Lees, that I do not think the Democrats in their contributions have really been prepared to tackle the equity position and argue it strongly. The evidence that was given to the committee indicated that what you were doing in attempting to zero rate food was a very blunt instrument indeed. It indicated that a lot of the benefits you are seeking for lower income people would flow to people on higher incomes. These were committees the Democrats were very keen to establish and the Democrats called a lot of people before them. The overwhelming expert opinion was that, if you were concerned about the issues of equity and you wanted to argue those issues, zero rating food was not the way to go. That evidence has been strongly ignored. A widely recognised world-class expert, Professor Cnossen, whose name has come up in this debate from time to time, indicated:Zero-rating food does little in alleviating the plight of the poor. In New Zealand it was estimated that households with the lowest 20 per cent of income would receive only 15 per cent of the aggregate benefit of a zero rate on food. The other 80 per cent of households not considered to be poor would receive 85 per cent of the benefit.Similarly, in the US, the Congressional Budget Office estimated that zero rating food would reduce the regressivity of a federal VAT by only 18 per cent. I am pointing out to you that the equity issue is an important one. We believe that the government has addressed very clearly the equity issue and we have looked at the experience elsewhere in the world. What you are proposing here is not the way to address the equity issue. As I said, we are supported by the evidence that was continually led before the committees which inquired into this particular issue.To Senator Murray I would say that a better explanation of why the government has adopted this approach is that we believe that we have established a tax package which is fair and equitable and which provides the compensation which is required. We rely on the evidence that was led before the committee by many experts.Senator Brown has made some interesting observations. I do not agree with Senator Brown's general position but I do agree with him—and he argued this yesterday and touched on it today—that there is great complexity being brought about as a result of the amendments now before us from the Democrats. We ran through some of the peculiarities which this would produce, and I do not want to add too much to what Senator Brown said to that because, to the extent that he was arguing the complexity issue, in general he was broadly correct.There are many hundreds of examples which would show that. For example, fillet steak would be GST free, but frozen hamburgers would be taxable under this amendment. I am not sure what the equity argument is there, but it is not one that I feel persuaded by. Fresh crayfish will be GST free, but frozen fish fingers will be taxable under the Democrat proposal. I am not sure where the equity argument lies there, either, and we can produce hundreds of examples like this.So there is an equity argument for why we should oppose what the Democrats are doing and there is a complexity argument, which has not been touched on broadly in this particular part of the debate but which I think is well known. In terms of creating a world-class tax system, this is what we believe we are achieving with the proposal which we have put before the chamber.I have listened carefully to the debate. The relentless assertion on the equity issue does not mean that the proposal before us is equitable, and I do not believe that that issue has been effectively addressed by the Democrats, nor have the arguments which have been run by a wide range of experts on this particular issue been addressed.I think that broadly covers it. There were some issues raised by Senator Peter Cook, who asked me for a response to his questions. As Senator Cook is here now, I shall respond to them. The general principle of the government's tax reform package is that food is taxable.There are a limited number of occasions when food is GST free. These occasions mainly involve situations where food is provided as part of a GST free service. These include, as I said yesterday, food provided to hospital patients, food provided to nursing home residents receiving GST-free care, food provided incidentally as part of a GST-free child-care service. Food may be also GST free if the supply of food qualifies as a non-commercial supply by a charity. For example, the supply of food below 50 per cent of market value at a soup kitchen would be GST free, and I think we would all support that.Food purchased by a business will not be GST free but will be taxable, but that business will be entitled to an input tax credit, provided it is a genuine business expense. This is the same principle, Senator Cook, that applies at the moment to income tax deductibility. The government is not changing the rules for income tax deductibility. Further, division 69 of the GST bill links the allowance of input tax credits to whether an item can be deducted for income tax purposes.There were a number of questions you put to me. One was this: `Would you agree that passengers on an inbound international flight get their food GST free?' Passengers on an international airline flight purchase a GST-free service that includes food as part of that service. This particular issue does not raise compliance costs issues of general food exemption, since determining whether a flight is international is relatively straightforward for the small number of businesses involved.Then you raised the issue of owners of greyhounds and horses and of farm animals and any purchases there. All the food in relation to those would be taxable. Business will be entitled to business tax credits to the extent that the food is a genuine business expense. We are well aware how that occurs under the current tax law, and this is very similar to the current income tax treatment of deductibility.There are a number of other issues you raised. We do not believe there is any additional complexity as a result of what we have proposed. Under the current system, business will have to differentiate between business related and therefore deductible expenses and non-business related expenses. You asked whether it is true that a business person attending a business convention on, say, the Gold Coast and claiming the business convention as an input to their production will have their air fares, their accommodation and the food they eat while they are there GST free. The answer to that, Senator Cook, is no. The items will be taxable. A business may be entitled to input tax credits for genuine business expenses. This is the same principle as currently applies for income tax deductibility.You were worried about the complexity if, say, you were a lawyer attending a legal conference on the Gold Coast. You said you would not pay GST on your air fares or your hotel and you damn sure would not pay GST on the food—if I quote you accurately, Senator Cook. You ask whether that is not a degree of complexity. I have answered the general issue in relation to food, and I have said in my response to the general point you made on complexity that there is no additional complexity for the business above that required for income tax or FBT. You asked whether this was hidden in the package, and I indicated to you that nothing is hidden. The bill is quite explicit in division 69 that there is a link between the ability to claim input tax credits and income tax deductibility.I think that responds to the general points you raised. I have covered the questions which were raised earlier in the debate by a wide range of speakers. We have had a long debate on this food issue, and the government will not be supporting the amendment which has been moved by the Democrats.10:32:005076Cook, Sen PeterSenator COOKRF4WAALP00—Thank you, Minister, for answering my questions as you have. But I think your answers leave more questions than have in fact been answered. As I understood you—correct me if I am wrong—you said in part of your answer that input tax credits are provided if it is a business expense. If that is what you are saying, it might save time if you could just indicate to me that that is right.WW4KEMPSenator Kemp—People would be entitled to an input tax credit if it is a genuine business expense.RF4Cook, Sen PeterSenator COOK—If I am in the business of racing greyhounds, the food for my dogs is an input to my business. In that case, is that food GST free?10:33:005076Kemp, Sen RodSenator KEMPWW4VICLPAssistant Treasurer10—Let me take you back to the current law. If you are a greyhound owner as a business and you purchase the food as a business expense for the greyhounds, under the current system, which you support, you are able to claim that, if it is a genuine business expense, as a tax deduction. But if you, Peter Cook, as a private person purchase food, you, Peter Cook, are not entitled to claim that as a tax deduction. This occurs under the current law which the Labor Party supports and which we inherited from the Labor Party. So the principle there is that, for a greyhound owner and a genuine business racing greyhounds, genuine business expenses to run that business are tax deductible under your system. Therefore, if food is a genuine business expense under the current system, that is tax deductible. But Peter Cook purchasing his food down at the local shop is not entitled to a tax deduction on that food.That is the principle, and it is a principle which has been strongly endorsed, I would have thought, by the Labor Party and others. This was part of tax law, I suspect, for a very long period of time and was not attempted to be changed. In fact, there were complexities brought into the law, as you are aware, with FBT—UI4RAYSenator Robert Ray—Which you opposed.WW4Kemp, Sen RodSenator KEMP—Which we have been able to amend and deal with. Nonetheless, it is complex. Anyone understands the complexities of FBT arrangements. But that is the principle, and it is a principle which is deeply embedded in the income tax system at this present time.10:35:005077Cook, Sen PeterSenator COOKRF4WAALP00—That is not quite the question I asked. You actually answered three different questions. Let me try and be more precise. Before I do, let me just say that this exchange will be helped a lot if the propaganda that you wish to use to tell everyone what the Labor Party position is were excluded from your answers, with respect, Minister. You tell us that we defend the existing tax system, that it is our system. That is a propaganda point. We came to the last election with a whole program of tax reform. That is our system. It is change to the present system and it is tax reform without a GST. But you want everyone to think that we have no policies on tax changes, so you go around saying that. Let us just get the propaganda out of the way and concentrate on the issue. I was not asking you a question on whether I, Peter Cook, or you, Roderick Kemp, a greyhound racing company, bought food that the owners consumed. If they bought food that the dogs consumed, that is an input to their business, is it not, and the food those dogs consume is not GSTable. That is the straightforward question, that it is not GSTable. Is that right?10:37:005077Kemp, Sen RodSenator KEMPWW4VICLPAssistant Treasurer10—When the food is purchased it is taxable, so there is a GST paid on that food. If it is a genuine business expense, as with all genuine business expenses the business can claim an input tax credit. But the food is taxable. As I said, the analogy is exactly the same at the moment where someone in a genuine business—say, someone who runs greyhounds—has to purchase food for the business. If he purchases food for the business, that is an income tax deduction. That is exactly the principle which is embed ded in the current tax system. So he is able to claim that as an income tax deduction, but when you, Peter Cook, go and purchase food—Senator Cook interjecting—WW4Kemp, Sen RodSenator KEMP—But I am making the point—and it is quite an important point—so that it will be well understood that when you purchase food, despite the fact you are the greyhound owner, the food that you purchase is not income tax deductible because it is not part of a business expense; it is a private expense.10:38:005077Cook, Sen PeterSenator COOKRF4WAALP00—I was not arguing that point. So what you are saying to me, if I can just get it clear, is that Roderick Kemp Greyhound Racing Co. purchases food for its greyhounds, it pays a GST under your bill on that food and then it claims back the value of that GST from the Commissioner of Taxation as an input to its production and the tax commissioner remits the GST value on that food to Roderick Kemp Greyhound Racing Co. Is that right?10:38:005077Kemp, Sen RodSenator KEMPWW4VICLPAssistant Treasurer10—I think that is a fair summary. That is the general flow. Of course it is slightly more detailed because you file a consolidated form and all that, but in general the principle is right.UI4RAYSenator Robert Ray—So if you order a bit of Bollinger for your greyhound, you get it back.DX5MARGETTSSenator Margetts—Or some fillet steak.10:39:005077Cook, Sen PeterSenator COOKRF4WAALP00—That is an interesting interjection because it does mean that if Roderick Kemp Greyhound Racing Co. buys fillet steak for its greyhounds on the night of the race and any of the owners eat the leftover fillet steak they have to run down to the butcher and pay a GST on it. But that is another matter.Honourable senators interjecting—RF4Cook, Sen PeterSenator COOK—You are talking about degrees of complexity. You are attacking the Democrats on degrees of complexity. There is a great deal of complexity in your own bill. Let me go to another example, having established that. I happen to be a supporter of the West Coast Eagles football team.UI4RAYSenator Robert Ray—Don't apologise.RF4Cook, Sen PeterSenator COOK—I am not apologising; I am quite proud of it.WW4KEMPSenator Kemp—This is more for the confessional, I think, than the chamber.RF4Cook, Sen PeterSenator COOK—No. I know you are a supporter of Carlton, but anyway let us not get AFL rivalries into this debate because we will be here until the cows come home. Of course the food the cows eat when they do come home is GST free, but that is not the matter.NB5CAMPBELLSenator George Campbell—Yes, but is the manure GST free?RF4Cook, Sen PeterSenator COOK—That is a load of horse—look, I will not get into that argument. This is a team of professional footballers who have a dietary consultant. The business of professional sportspersons in this case is one in which they earn money because of their sporting prowess and ability and they are required by this team, under the advice of the dietary consultant, to eat particular food, carbohydrates, before a match. Indeed, for the four days leading up to the match they have a graph of the consumption of the carbohydrates that they have to take to give them energy on the day, and if they do not do it they are in breach of the rules of the club and of their contract. These are professional sportspeople. My question is: is the food that they consume in their business of being a professional sportsperson able to be, as in the case of the greyhounds, rebated by tax; that is to say, they end up at the end of the cycle not having to pay GST on their food? Is that the case if you are in the business of being a professional sportsperson with particular dietary requirements in order to pursue your sport?10:41:005078Kemp, Sen RodSenator KEMPWW4VICLPAssistant Treasurer10—I have received some rapid advice. As I have indicated, the test is whether the particular expense is currently deductible. Is it deductible under the current law? If the expense is, that is the test which is applied here. I am advised by my tax officers that in fact there have been some rulings on similar cases. I do not think this is the place to give tax rulings on particular cases, but there have been tax rulings on similar issues and they are not tax deductible.10:42:005078Cook, Sen PeterSenator COOKRF4WAALP00—So professional sportspersons under contract to a professional sporting club who, in terms of their contract with their club, are required to, in the conduct of their profession, consume certain foods cannot claim an input tax deduction on the GST. Is that what you are saying?10:43:005078Kemp, Sen RodSenator KEMPWW4VICLPAssistant Treasurer10—They cannot claim under the current arrangements, as I understand it, and I am being slightly cautious here because I do not want to be giving rulings, but perhaps people would accept the generality of what I am saying in relation to this. My understanding is that there have been similar cases in which the Commissioner of Taxation has issued rulings. The rulings of the tax commissioner in like cases, as I understand, are that they are not tax deductible as a business expense. So under the current law in the case you quoted—where someone is required, as part of their sport, to consume a certain food—that is not deductible. This is in contrast with the current system where we dealt with the issue of the inputs to a greyhound racing business that is being run. So, in relation to the sportsman, it is not regarded as an expense which is deductible and, therefore, because we link deductibility under the GST to the current tax law, the situation is the same.10:44:005078Cook, Sen PeterSenator COOKRF4WAALP00—So what you are saying is the dog gets it but the sportsman does not. Is that right?10:44:005078Kemp, Sen RodSenator KEMPWW4VICLPAssistant Treasurer10—No. What I am saying is that, at present, under the law which was left to us, the greyhound racing business gets deductibility under the current law but the sportsman does not. We are, in a sense, giving a mirror image of that. That is exactly the principle. This is not a principle. This is a principle which you and your colleagues were very happy with under the law, which you said is not your policy, although I have to say that I was interested in your comments on what your policy is because Senator Sherry made a comment yesterday—RF4COOKSenator Cook—Oh, look.WW4Kemp, Sen RodSenator KEMP—He did.RF4COOKSenator Cook—Do you want to be here all morning?WW4Kemp, Sen RodSenator KEMP—No, I do not. You said to me that I am not speak about your policy. Senator Sherry said:I am certainly not privy to advance copies of any tax policy; it does not exist at the present time.That is what Senator Sherry said about the Labor Party yesterday.10:45:005079Cook, Sen PeterSenator COOKRF4WAALP00—Hooray for you, Minister, that is a debating point! You know what our policy is; we put it to the Australian people at the last election. So the dog gets it but the sportsperson does not, and you defend that on the basis that that is the existing law. But of course your tax changes, the whole 27 bills we have under consideration, are to change the existing law, and if you do not wish to change that then you accept that as a principle of your tax system.WW4KEMPSenator Kemp—Do you accept it as a principle of yours?RF4Cook, Sen PeterSenator COOK—Under our tax system there is no GST, Minister. If you want to get into an argument about that: you are imposing a GST; there is a lot of food that is not subject to tax—which is the point the Democrats have been making for the last couple of days; I thought it would have reached you by now—and if this goes through there will be a lot of food which will be taxed for the first time. You argue that you cannot do a deal with the Democrats on the basis of complexity; I am just pointing out some of the complexities in your system.Let me move on, having heard what you have said—that the dog gets it but the sports person does not, even though it is a requirement of their profession in this case. In answer to the question you said that input tax credits are provided if it is a business expense. So, if I am a merchant banker and I live in Perth and I fly to Sydney to conduct my business in organising a takeover of a company in Sydney, is the cost that I incur for the airfare, the hotel accommodation and the food I consume an input to my business or is it not?10:47:005079Kemp, Sen RodSenator KEMPWW4VICLPAssistant Treasurer10—The general principle applies: are they deductible now? If Senator Peter Cook as a private person flies from Perth to Sydney, he cannot claim those expenses; they are private expenses. If Peter Cook, merchant banker, flies to Sydney and has general business expenses and they are deductible under the current law, the general principle of course is that they are taxable. But, if they are deductible under the current law, input tax credits can be claimed. So that is the linkage. The issue in relation to meals, as I understand it from advice from the Australian Taxation Office, is:Meal expenses are deductible for employees if they are incurred in relation to travel they are required to undertake to perform their jobs. Such expenditure is generally matched by travel allowances paid to them by their employers.The Commissioner of Taxation has issued a Taxation Ruling . . . which excepts deduction claims based on travel allowances from substantiation requirements provided they do not exceed reasonable levels.So, as I said, it is the same principle that is applied under the current system.10:49:005079Cook, Sen PeterSenator COOKRF4WAALP00—A principle you incorporate in your tax system, which has to be the point. So the answer you have just given is—and correct me if I am wrong—that if I go from Perth to Adelaide to visit my mother, as a private citizen, I pay GST on my airfare, on my accommodation and on the food I consume, but if I am a merchant banker and I fly to Adelaide for business I do not pay GST on my airfare, I do not pay GST on my accommodation and, to quote myself from yesterday, I sure as hell do not pay GST on the food I consume because that is a business input. That is correct, isn't it, Minister?10:50:005080Kemp, Sen RodSenator KEMPWW4VICLPAssistant Treasurer10—You pay GST, but if it is a genuine business expense you get a credit. That is the principle.10:50:005080Cook, Sen PeterSenator COOKRF4WAALP00—I get a credit—which means it is refunded. So, in effect, I pay it up-front and get it back from the tax commissioner. So at the end of the transaction I have not paid the GST; that is my point. That is if I am a merchant banker. Let me try you with another example, and this time I am a lawyer. The Law Council of Australia is having a legal convention on the Gold Coast. Perhaps I am a family lawyer and the theme of the law convention is family law. Perhaps there are some visiting international experts in jurisprudence on family law coming to address this convention. As a lawyer, this is front and centre professional information and background to my capacity to be successful. I fly to the convention, I participate in it and I fly home. I am working within my profession and increasing my skills and knowledge of my profession. In those circumstances are my airfares, my accommodation or my food GSTable? If your answer is, `Of course they are, but you claim it back and then you will get it refunded,' that means to me as a lay person that, after all of this slipping and sliding, I do not pay GST. When I ask you whether it is it GSTable, of course I pay GST up-front and of course I claim it back as a business cost to my practice, and I guess the question is: does the Commissioner of Taxation then refund my GST costs?10:51:005080Kemp, Sen RodSenator KEMPWW4VICLPAssistant Treasurer10—You are right, it is taxable. The test is: is it a genuine business expense? If it meets that test of a genuine business expense—and that is well established under current law—you are entitled to claim an input tax credit, and the principle is that that is refunded to you.10:52:005080Cook, Sen PeterSenator COOKRF4WAALP00—My understanding of the current business law is that, in those circumstances, I can claim it back as a business expense if I am a lawyer attending a conference dealing with matters that are pertinent to my profession. That is true, isn't it, Minister?10:52:005080Kemp, Sen RodSenator KEMPWW4VICLPAssistant Treasurer10—I am not a lawyer, and I do not go to legal conferences, so I have no direct personal knowledge of this. The general principle is that if it is a genuine business expense the GST will be paid on the expenses. As I said, the test is: is it deductible under the current law? If it is deductible under the current law, you can claim an input tax credit. I have answered that a couple of times.10:53:005080Cook, Sen PeterSenator COOKRF4WAALP00—I know you are not a lawyer, and I respect your confession that you are not a lawyer, but you are here as the Assistant Treasurer of the Commonwealth of Australia answering questions on a tax bill that the government says is the great adventure for Australia in taxation and is the most revolutionary change in tax law ever. Sitting alongside you are six of the best advisers that Treasury, the Taxation Office and Mr Costello can provide you with. In that case, Minister, you are the qualified person to answer the question. My question again is: under the existing arrangements—which you use to defend your current proposal—isn't it true that in the example I have quoted it is a business expense for my professional practice for me as a lawyer to go to that conference, to be accommodated at that conference and for the meals I have at that conference and that I can deduct those expenses? If it is, I can deduct the GST too, can't I?10:54:005080Kemp, Sen RodSenator KEMPWW4VICLPAssistant Treasurer10—Yes, we have been through that. That is the case. I repeat: the general expenses that you have mentioned are taxable—if I recall them correctly—and the GST is paid on them. The question then arises: is the expense a genuine business expense? If it is a genuine expense under the current law, then you are entitled to claim an input tax credit.10:55:005081Cook, Sen PeterSenator COOKRF4WAALP00—Hallelujah! That is a yes—or it is as close to a yes as we will get.Senator Kemp interjecting—RF4Cook, Sen PeterSenator COOK—You are right—that is what you said. I do want to go to a vote very soon, but I want to laboriously tie this down. That puts into some context the complexities over food, because the same would apply whether I was an accountant attending an accountants convention or whether I was a conventioneer of a whole range of businesses and business activities. It may even apply, for all I know, to delegates to an ACTU congress. But the whole convention junketeering group can get a GST concession that ordinary battlers cannot get, will not get. That is my point.3M6MURRAYSenator Murray—Even if they go to the same convention.RF4Cook, Sen PeterSenator COOK—Even if they stand there with their noses pressed against the window, they will not be able to get it. If the convention happens to be on the Gold Coast, the business people can jet in and go to a five-star hotel. The tourists also can jet in, and one class will get a rebate and the other will pay the full freight. One class will eat at the five-star restaurant, the other class will go down to the McDonald's restaurant. Those who go to McDonald's will pay the GST. Those who go to the five-star restaurant can claim it back as a tax deduction and pocket the change. And you reckon this system is fair!When you put your legislation to the House of Representatives, you said it was perfect. You tried to slip the high rollers amendment for gambling into the pack of 128 amendments to the legislation before the Senate. There is a consistent thread that is beginning to emerge of unfairness and inequity which is hidden in your package. You preferred to sneak through—if you possibly could, but you got sprung, unfortunately for you—a high rollers amendment in a pack of 128 amendments, and you were caught red-handed.What did you tell the people of Australia before the last election? You are claiming a mandate in this debate. The mandate is what you told Australia you were going to do before the last election, and the mandate is allegedly contained in the document, Tax Reform: not a new tax a new tax system—Liberal Party propaganda that Australians had made available to them before the last election, courtesy of the taxpayer. You say that explained everything, and every last word, every last paragraph, every last comma, full stop or semicolon in the document is endorsed. So what did you actually tell them? We know you did not tell them about the high rollers—that came later. What did you tell them on this? On page 91 of your own document, `Input tax credits', this is what you said:Input tax credits will not be allowed for the GST paid on certain inputs that are essentially private in nature (for example, meals and entertainment expenses).Why didn't you say: `Input tax credits would be allowed on certain business expenses: for example, people attending conventions, professional organisations holding conventions, for business expenses that business people will incur in the conduct of their business'? That would have been honest. We would have all known what you intended. You buried it in the reverse form of words in order to make it appear there would be no qualification. But when one goes to the detail of your own legislation and compares this document, what you promised, with this document, what you will do, the difference is that there is a range of exemptions that are not obvious, that were never made clear to the Australian people. I never heard Mr Howard say it in his policy speech, as he never said it about high rollers in his policy speech. In short, you cannot claim a mandate on this. This is yet another example of one of the inequities that you have tried to bury in the detail of this document.Having established that point, and because I do want to go to a vote, let me move to a question not to you, with respect, Minister, but to the Australian Democrats, who are the movers of the amendments before the chamber at the moment on exempting food. I notice that we are attended in the chamber by Senator Murray, who has been handling this debate, and also by Senator Lees, who is the Leader of the Australian Democrats. I am not sure who is the appropriate person to answer it.We have had this debate now for about a day of parliamentary sitting time. We have covered a lot in that time, and I agree with your argument that food should not be subject to a GST. Where I part company with you is: I do not think anything else should be subject to a GST either. To take food out of this package is to make the package appear fair when, in fact, it is still a dangerous package for ordinary Australians and it is still basically inequitable.So we are going to vote against your amendment, and we are going to do that so the whole package then in its gruesome splendour can be revealed to the Australian people, and this will be what this government wants. When this package stands, we will be asking whether or not you will join us in voting that package down. So my question to the Australian Democrats is: during the election campaign you said that you would not support a GST if there was food in that package. In numerous doorstops that you have held since then and in numerous interviews and 7.30 Report appearances that you have had since then, you have strengthened that point by saying that as far as the Australian Democrats are concerned there will be no GST with food in the package. So, if this vote is lost and there is food in the package, will you support the GST?11:02:005082Lees, Sen MegSenator LEES8U4SAAD00—Thank you for that question. That gives us an opportunity to put on the record that if our amendment is defeated—or perhaps I should say `when it is defeated'—in a few moments, we will not vote for the GST. But we will stay in the debate in this chamber attempting, section by section, cause by clause, to improve the package in case this eventually gets up. So I will say it again: no, we cannot support the GST if this amendment goes down.One option is that the amendment can be recommitted before we get to the third reading vote. If all else fails and suddenly the Treasurer decides he really is committed to Mr Howard's package and he thinks he had better start talking to the Democrats after all, and we actually get this recommitted, I say to him, through the senator who is handling this legislation for the government: there are a lot of other amendments that will also need to be recommitted if they too go down. The second scenario is: if we have no recommittal and it stays as it is—that is, food is GSTed—then the Democrats will oppose the package.But we are going to stay in the debate in case, thanks to support from other parties, the package does get through, because we believe—unfortunately, the Labor Party does not—we should stay with any piece of legislation to try to get it as presentable as possible. That is why we will stick to our amendments on housing, tourism, health, education and, particularly, diesel, because so much in this package is irresponsible. Not only is it unfair in its impact on probably about the bottom 40 per cent of income earners in this country and their families but it is also an environmental disaster as long as those measures on diesel stay there and there is lack of support for other incentives, such as incentives for solar power and other alternative technologies.So we will now go to the vote. We expect to lose it, but on a matter of principle we will be calling for a division. But this is not the end of it, Senator, and I do not think it is for the Labor Party either, because if we do end up with a package with food in it not only do I think it will be unsaleable by this government in the community but we will go to the next election—and I warn the government now—campaigning strongly for the changes that we are demanding to this package, including removal of food. I think we will be joined by the community, because they will see the impact of this before the next election. Once the community sees what this means on a day by day basis, this government will not survive.11:05:005082Cook, Sen PeterSenator COOKRF4WAALP00—I would like to respond, and I will then conclude. I thank Senator Lees for her forthright and honest reply to that question. I acknowledge that that answer is consistent with what the Democrats have said throughout.I pay you my respects for the honesty with which you have applied yourself to this argument on that basis. Your answer was a gracious one. It could have been less gracious; it was not, and I appreciate that. We are going to defeat your amendment. And, when we do, we will welcome you on board the anti-GST united front to try to defeat this legislation. I just wish to acknowledge the forthrightness and the graciousness with which you have done that.UNKNOWNThe TEMPORARY CHAIRMAN (Senator Crowley)The TEMPORARY CHAIRMAN (Senator Crowley)—The question is that Democrat amendments Nos 2 to 16 on sheet 1353, revised, be agreed to.11:10:00The committee divided. (The Chairman—Senator S. M. West)9Allison, L. Bartlett, A. J. J.Bourne, V. *Brown, B.Lees, M. H. Margetts, D.Murray, A. Stott Despoja, N.Woodley, J.53Abetz, E. Bishop, T. M.Bolkus, N. Boswell, R. L. D.Brownhill, D. G. C. Calvert, P. H. *Campbell, G. Carr, K.Chapman, H. G. P. Colston, M. A.Cook, P. F. S. Coonan, H.Cooney, B. Crane, W.Crossin, P. M. Crowley, R. A.Denman, K. J. Eggleston, A.Ferguson, A. B. Ferris, J.Forshaw, M. G. Gibbs, B.Gibson, B. F. Heffernan, W.Herron, J. Hogg, J.Hutchins, S. Kemp, R.Knowles, S. C. Lightfoot, P. R.Lundy, K. Macdonald, S.MacGibbon, D. J. Mackay, S.McGauran, J. J. J. Minchin, N. H.Murphy, S. M. O'Brien, K. W. K.O'Chee, W. G. Parer, W. R.Patterson, K. C. L. Payne, M. A.Ray, R. F. Reid, M. E.Schacht, C. C. Sherry, N.Synon, K. M. Tambling, G. E. J.Tierney, J. Troeth, J.Vanstone, A. E. Watson, J. O. W.West, S. M.Question so resolved in the negative.11:15:005083Bartlett, Sen AndrewSenator BARTLETTDT6QLDAD00—by leave—On behalf of the Democrats, I move Democrat amendments Nos 1, 3, 4, 6, 7, 9, 10 and 11 on sheet 1365:(1) Division 37, page 76 (after table item 19), insert:19A New home buyers and renovators Division 169[housing](3) Page 234 (after line 21), after Division 168, insert:Division 169—New Home Buyers and Renovators GST Rebate169-1 Rebate of GST to New Home Buyers and Renovators(1) This section applies to the supply (whether or not a transfer of real property occurs) to you by the holder of an *Australian Business Number of: (a) *new residential premises, other than *commercial residential premises; and (b) *major renovations.(2) The maximum rebate allowable under this section is $12,000 in the case of a *first home buyer, and $6,000 in any other case.(3) You are entitled to a rebate of up to 100% of the GST payable on the supply to you of new residential premises if you are a *first home buyer.(4) You are entitled to a rebate of up to 50% of the GST payable on the supply to you of *new residential premises in any other circumstances.(5) You are entitled to a rebate of up to 50% of the GST payable on *major renovations where the premises are used or intended to be used for the purposes of rental accommodation.(6) Where *new residential premises are supplied to you on *real property which you acquired as a *taxable supply; the amount of the GST paid on that *taxable supply will be added to the GST payable for the purposes of calculating the rebate available under this section. (7) A rebate under this section must be jointly claimed by you and the supplier, within 2 years of the date of supply.(8) You may agree with the supplier to transfer your entitlement to this rebate to the supplier in part consideration for the supply.(9) Where a supplier has been assigned an entitlement to a rebate, the supplier may deduct that rebate from GST payable on the supply to which the rebate relates.[housing](4) Clause 195-1, page 259 (after line 24), after the definition of financial year , insert: first home buyer means a person who is an Australian citizen and a permanent resident, who is acquiring their first home in Australia, and has not previously owned a home either separately or jointly with any other person.[housing](6) Clause 195-1, page 265 (after line 21), after the definition of long-term lease , insert: major renovations means *renovations where the contract value exceeds $10,000.[housing](7) Clause 195-1, page 267 (lines 12 to 14), omit the definition of new residential premises , substitute: new residential premises means *residential premises that have not previously been used for residential purposes and: (a) have not previously been sold as *residential premises; or (b) have not previously been the subject of a *long-term lease; or (c) are premises which have been created through *substantial renovation of existing premises; or (d) have been constructed to replace previously demolished premises on the same land.[housing](9) Clause 195-1, page 270 (after line 5), after the definition of private health insurance , insert: private residential premises means residential premises other than commercial residential premises.[housing](10) Clause 195-1, page 272 (after line 8), after the definition of relevant traveller , insert: renovations means the repair, reconstruction, alteration or addition to existing *residential premises.[housing](11) Clause 195-1, page 274 (after line 21), after the definition of Subdivision 38-N period , insert: substantial renovations means *major renovations where all, or substantially all of the premises are removed or replaced, with the exception of the foundation, external walls, interior supporting walls, floor, roof, and staircases[housing]These amendments relate to housing issues. Whilst a lot of the attention to date in relation to the tax package has been on food, the Democrats have been at pains to point out many of the other problems and inadequacies of the government's tax package as it exists. Certainly the issue of housing is a fundamental and crucial one—often referred to as part of the necessities of life, quite reasonably—and one that is significantly affected, potentially very negatively, by aspects of this tax package. There are a number of different aspects to it, particularly in relation to the potential impact on the costs of public housing, on private rental, on home ownership costs, et cetera. These particular amendments deal specifically with the home purchasing costs for home buyers. They seek to establish a GST new home rebate, which would replace the First Home Owners Scheme, to compensate purchasers of new housing for the impact of the GST.The amendments are very important. As I have just outlined, housing is an important issue. It was one of the terms of reference of the Senate Community Affairs Legislation Committee on which I represented the Democrats. That committee received a lot of very worthwhile evidence about matters relating to housing. Without trying to sound churlish, I would have to say that the government was one of the areas from which we did not get much information about the impacts of the GST on housing. That was a great concern and a disappointment to me and to the Democrats.These amendments that I have just moved on behalf of the Democrats are very important and have been developed in close consultation with the Housing Industry Association. They also broadly pick up concerns of other groups about the impact of the GST on housing, including the Urban Development Institute, National Shelter, ACOSS and various tenant organisations. The amendments represent a real win-win solution for home buyers and for renters. The amendments significantly reduce the cost of housing under a GST, but without adding to the cost of the tax package as a whole. I should emphasise that: they will not add to the cost of the tax package as a whole. They are economically responsible, which is something the Democrats have ensured in our approach to this tax package. They are constructive attempts to improve what is clearly a flaw in the tax package. For that reason, I do hope that the Senate gives them serious consideration.The First Home Owners Scheme, which will cost around $800 million, provides a grant of $7,000 to first home buyers. This is in theory—from the explanations of the government—to compensate them for the higher cost of housing due to a GST. But as information provided to the Senate committee demonstrated, the vast bulk of the $800 million will be in windfall gains to first home buyers rather than compensation for the GST. This is because around 85 per cent of first home buyers are buying established homes rather than new homes. The GST will barely affect the price of existing homes as the cost of building these homes was obviously pre-GST.The residential housing sector, which employs around 300,000 people, will also be adversely affected by a GST. Murphy and Monash modelling forecast a 2½ per cent decline in housing investment. Murphy has suggested that the price of house construction will rise around six per cent and the price of a house and land package by about five per cent. Employment in housing is forecast to fall by 8,000 jobs, partly offset by a 7,000 job gain in commercial construction. Again, it is important to emphasise not only the issues of fairness and equity that the Democrats have spoken about often but also the issue of employment. The six per cent rise in house prices compares with the 4.7 per cent increase forecast by Treasury—another area where Treasury's forecasts seemed to be lower than everybody else's. The Housing Industry Association, HIA, estimates that the price of new homes will rise by eight per cent on the introduction of a GST, falling to five per cent in the longer term.Rents will also rise in the longer term as the higher cost of building flows through to rents. Modelling by Econtech suggests that rents will rise by three to four per cent in the longer term. Other bodies giving evidence to the Senate inquiry suggested that the rise in rents could be even higher—as much as eight to 12 per cent. I suggest that they are figures that should be taken quite seriously. The rental market is a completely different market to the home owners market, and it various enormously from city to city, from city to the country, from regional to capital cities and, indeed, within cities.Whilst there is obviously some relationship between the cost of rents and the cost of purchasing housing, it is simplistic in the extreme to automatically draw precise parallels between the cost of housing in a particular spot and the cost of private rental; similarly, to use a universal across-the-board formula to suggest that, if the cost of housing goes up by three per cent, four per cent or whatever, the cost of private rentals flowing on over time will similarly be three or four per cent higher. There is an enormous variation. I am sure all senators would be aware of examples in different parts of Australia. I know that in my own home state of Queensland, in some of the regional towns and coastal towns, housing is reasonably cheap to purchase, but the availability of housing for rental is extremely minimal and therefore the rents are extremely high. Obviously that is dominated by, and dictated to, market forces, and those market forces do not just rely on simple economic modelling flow-on calculations. There is a lot more dynamic than that.I think the reality of potential rent increases needs to be taken seriously. Some of these figures that were suggested as potential rent increases in some parts of the country—not a universal across-the-board increase, but from eight to 12 per cent in some parts of the country—come from organisations which specialise in housing issues and look at them on a day-to-day basis. It is the focus of their activities. They are people that know what they are talking about.Without being too critical of the government department, the impression I got from evidence the officers from the relevant government department gave to the Senate Community Affairs References Committee would suggest that not quite so much thought had gone into considering all the potential flow-on effects and potential consequences. Rents may rise not just because of higher building costs. Part of the increase would flow from higher demand for rental properties, as potential home buyers are forced to defer decisions and as landlords reduce investments in response to higher prices and lower returns.These sorts of figures relating to the potential rise in rents are of great concern to the Democrats. After food the next biggest cost item for low income earners is housing. It is 19.3 per cent of the household spending for the bottom quintile. That four per cent rise in rental costs—even if it is as low as four per cent—will hit that sector hard. The rise in rental assistance will never provide full compensation, as rental assistance is paid to only about half of social security beneficiaries and, in any event, it only goes up to, at most, 75 per cent of the price difference. It will not affect all those people and people in rental are, broadly speaking, in the lower socioeconomic bracket.The government's First Home Buyer Scheme not only compensates 85 per cent of home buyers who do not need compensation or need less compensation but also does not compensate the millions of private sector entrants facing real increases because of the GST. It is a blunt, poorly targeted giveaway that fails, on the basic test of value for money, in alleviating the cost impact of the GST on housing. The Democrats' proposed GST new home rebate addresses these problems. The scheme will provide a 50 per cent rebate on the actual GST paid on new housing, rising to 100 per cent for first home buyers. The rebate will also apply to new housing for rental purposes and to major renovations of rental properties to ensure that funds are spent on maintaining rental properties in a reason able condition for the people that pay the rent on them.The Housing Industry Association commissioned modelling from Econtech on the price impact of replacing the First Home Buyers Scheme with a GST compensation scheme at the same fiscal cost. They recommended a rearranging of the First Home Buyers Scheme into a rebate scheme because, they argued, around $600 million of the $830 million earmarked for the current scheme would be used to support the purchase of GST-free homes. That was provided in evidence submitted to the committee by the HIA. By converting the scheme into a partial GST stamp duty rebate scheme, at a cost of only an additional $90 million, much of the negative effect on housing is reversed.Econtech's modelling of the effect of the HIA compensation proposal provided some quite significant figures. The proposal eliminates three-quarters of the negative impact on residential building activity, 60 per cent of the job losses, 60 per cent of the price effects and 90 per cent of the predicted increase in rents. Further, it would mean a long-term CPI decrease of 0.7 per cent. It is worth remembering that Murphy also found that zero rating of food—not that we want to revisit the food debate just now—would reduce the long-term CPI from 0.8 per cent to negative 0.5 per cent. So that CPI increase will reduce the effect on prices even further.The model proposed by the Democrats in these amendments is structured slightly differently from the proposal used in the HIA modelling, but the overall economic effect is similar and the modelling results are unlikely to be substantially different. That, combined with zero rating of food, would mean that we would eliminate the price effect of 43 per cent of the spending on food and rent by low income earners.Once you add in our proposals to broaden the health exemption, and zero rate public transport and books, around 60 per cent of the spending of low income earners would be picked up by concessional GST treatment, with zero or indeed negative price effects. That is a great outcome for low income earners, and these amendments are an important part of that strategy.11:27:005087Margetts, Sen DeeSenator MARGETTSDX5WAG(WA)00—Food and shelter are about as basic as it gets. The Greens (WA) have stated that we believe any consumption tax should incorporate the principle of differentiating between basic necessities of life on an equity basis and sometimes totally unnecessary luxuries, and should consider issues like environmental damage that currently are not factored into the system. On that basis, I will be supporting the Democrats' amendments to exempt housing.11:28:005087Sherry, Sen NickSenator SHERRYZW4TASALP00—I understand the lump sum payment of $7,000 from July 2000 is not indexed; it is a fixed monetary figure. I ask the Assistant Treasurer: why is that the case?11:28:005087Kemp, Sen RodSenator KEMPWW4VICLPAssistant Treasurer10—To speed up the debate I will provide an answer to that, but if there are other questions it would assist if we could get those down so that we can then move to the core. I wish to respond to what Senator Bartlett, who moved the motion, raised. My general preference is to deal with the questions at the end of the debate rather than at the start. Do Senator Sherry or any others that wish to make a contribution have other questions we can respond to?11:29:005087Sherry, Sen NickSenator SHERRYZW4TASALP00—I will be making a comment about these amendments, but I may have a further question or comment to make, depending on the answer you give to the question I have just asked.11:29:005087Bartlett, Sen AndrewSenator BARTLETTDT6QLDAD00—I think it would be worth while if I outlined in more detail the specific technical aspects of the amendment which may assist senators in terms of how it will actually operate in practice. Of course, we outlined the rationale, the justification and the benefits; but I think the technical operations are important. This GST new home rebate will apply when new homes are bought from builders operating under the Australian business number system; to new homes utilised for owner occupancy; for private and public rental accommodation; and also to new homes being a single dwelling, semi-detached house, apartment or transportable home. So first home buyers will be eligible for a GST new home rebate of up to $12,000 paid on the purchase of a new home, including land. Other purchasers of a new home, including public housing authorities, will qualify for a maximum rebate of $6,000. I think it is important not to forget the potential impact of this package on public housing authorities and their ability to stretch their budgets to meet the very significant and important areas of public housing need.Under the amendments, `purchase price' means the price paid to the builder for the house and land before the GST is calculated and does not include any associated legal fees or agents fees. Sales of new homes erected on existing land, new homes built to replace previously demolished homes on the same land, and substantially renovated homes should be treated in the same way as sales of new housing. `Substantial renovation' means that all or substantially all of the dwelling, except the foundations, external walls, interior supporting walls, floor, roof and staircases, are removed or replaced. New and amended definitions have been developed for the dictionary in division 195 to achieve this.For example, a builder in the renovation business purchases an established dwelling upon which there is no GST on the purchase price. He completely guts and replaces the interior with new walls, ceilings, floors, kitchen, wiring and plumbing. The substantially renovated home, when sold, should be, for GST purposes, treated like a new home. The purchaser will be entitled to claim the GST new housing rebate under this example.Other renovations or improvements to a home, such as replacing a kitchen or building an addition, are not considered substantial renovations. If GST has been paid on the acquisition of the land, a rebate can be claimed only after a contract for a new dwelling on the land has been entered into. Where land has been purchased prior to 1 July 2000 or the commencement of the GST, a rebate will not be payable on the purchase price of the land.An application for the GST new housing rebate must be made jointly by the purchaser and the builder. The rebate form would be available from builders, real estate agents, financial institutions and the Taxation Office. Whilst the purchaser must apply for the GST rebate, the purchaser can assign the right to receive the rebate to the builder selling the new home. This assignment allows the builder to pass the benefit of the rebate on to the purchaser at the time of sale and reduce up-front financing requirements. If the rebate is not paid or credited by the builder, the purchaser has up to two years under these amendments, from the date of completion of the project, to claim the rebate directly from the Taxation Office.Referring specifically to amendments Nos 6 and 10, which deal with the major renovations of rental accommodation rebate, under the GST leased residential premises are input taxed. Landlords pay GST on the goods and services they acquire, such as repairs and maintenance, but cannot claim an input tax credit for that GST. There is no GST charged on rents. So landlords therefore face a financial disincentive to perform needed renovations, alterations, additions or repairs to their rental properties. Certainly, from my experience over a number of years working on housing issues and tenancy issues—in particular in Queensland—ensuring that landlords actually maintain properties in a condition fit for human habitation is unfortunately, in some circumstances, already difficult enough to achieve. Providing extra financial disincentives for them to do that is something the Democrats are greatly concerned about. So major renovations or improvements will be eligible for a GST rebate where a dwelling is leased or intended to be leased as a rental property. Rental property owners—public and private—will be eligible for a GST rebate of 50 per cent of the contract price of home renovations and improvements where the contract value exceeds $10,000 and the contract is with a builder registered under the Australian business number system.I think that outlines the technical operation of the Democrats range of amendments in relation to housing. Again, I wish to emphas ise how important this area is for the potential impact of the tax package. As I said at the start of my contribution, there has been a lot of focus on the issue of food. Other issues—such as housing—which are just as important have not received as much public attention. Perhaps this is partly because, in many ways, housing is more complex than food. The way the housing and rental markets work is a bit mysterious for many people. But clearly the evidence provided to the Senate community affairs committee by organisations such as the Housing Industry Association and the New South Wales Federation of Housing Associations which work and deal with housing issues on a daily basis show that this is an area where there will be significant negative impacts if improvements such as those suggested under these Democrat amendments are not made.There is a great deal of confusion in the community about the impact on housing in all its various forms. The housing sector is complex and, of course, when people talk about the housing market they are talking about several markets of very different natures. There is the new housing market, the second-hand market, the rental property market, public housing, community housing, cooperative housing and mobile homes, among others. The evidence provided to the committee of inquiry certainly gave me a lot of concern that there had not been an adequate amount of work done prior to the formulation of this package in determining exactly how the GST and the associated tax reforms will impact upon all these sectors of the housing market. That situation makes it hard to take on face value the government's sweeping statements that no group in the community will be worse off. Clearly, work had not been done on determining the potential impact on all of these many, very different parts of what is described by the single label of `the housing market'.Generalisations about the housing market often mean very little. As with many other issues that have come up in this tax debate, nationwide averages might make sense to economists and provide handy general benchmarks, but they are often not terribly mean ingful or helpful to individuals who fall a long way above or below those averages. So those arguments and those issues apply just as much, if not more so, to issues relating to housing as they do to issues such as food, which we have previously debated.11:37:005089Kemp, Sen RodSenator KEMPWW4VICLPAssistant Treasurer10—The Democrat amendments would replace the First Home Owners Scheme. They would limit assistance for the impact of the GST on housing to the purchasers of new housing and purchasers of major renovations to premises used for rental accommodation. The government does not agree with these amendments. The government's proposed First Home Owners Scheme is intended to compensate people with no equity in existing housing for the effect of the GST on home prices. The scheme does not differentiate between purchasers of new and established houses. It will fully compensate first home buyers for the increase in the price of new homes with a construction value, excluding land, of up to $150,000. The Democrat amendments would merely redirect assistance to purchasers of new homes and purchasers of major renovations, many of whom already own houses and would benefit from any GST induced rise in house prices.The amendments would transform the government's First Home Owners Scheme from a scheme aimed at compensating those without any existing housing equity into a scheme aimed at benefiting the building industry. Indeed, the Democrat amendments would lead to a fall in the cost of buying a house, as their scheme gives a full rebate. The Democrat amendments make no allowance at all for the significant industry cost reductions that would flow to the building industry. The Democrat amendments would also be biased against first home buyers who wish to move into established areas such as inner cities.To conceptualise it, there are significant adverse effects as a result of the amendments which Senator Bartlett has moved. The amendments would disadvantage first home buyers who wish to purchase an established home rather than construct a new home. This shift in emphasis may preclude many first home owners from purchasing the home most suited to their needs and budget, and deter many new entrants to the housing market. The amendments could have an adverse effect on the market for established dwellings, with flow-on effects to the rest of the building market.In effect, the Democrat amendments would redirect assistance away from first home buyers, as I said, towards purchasers of new homes and major renovations. Many of these people may already own homes and would also benefit from any GST induced rise in house values. So we are opposed to these amendments.In relation to Senator Sherry's question, there is no commitment in the Commonwealth-state agreement to indexation. The government believes that the $7,000 payment is fair compensation for when the GST is introduced. The states will receive all GST revenue. If over time the states believe that they need to increase the value of the First Home Owners Scheme, then they will have GST revenue to fund any such change.11:41:005089Sherry, Sen NickSenator SHERRYZW4TASALP00—On that response by Senator Kemp to my question about the failure to index the $7,000, he said that if over time the states wished to increase the compensation they have the GST revenue to do that. Has that issue been discussed with the state governments?11:42:005089Kemp, Sen RodSenator KEMPWW4VICLPAssistant Treasurer10—I cannot go into depth about discussions other than that which has been released into the public arena, that is the agreement. Clearly, as I said, if the states wish to make the change, we will be providing the revenue for the administration of the First Home Owners Scheme. The states will get all the GST revenue and if they wish to change it there is nothing which I am aware of in the agreement which would prevent them doing that.11:43:005089Sherry, Sen NickSenator SHERRYZW4TASALP00—Are state housing ministers aware that the $7,000 that they will be administering is a fixed amount and not indexed, and therefore would erode over time? Are they aware of a demand—I am sure there will be a demand—that that $7,000 be maintained over time?11:43:005090Kemp, Sen RodSenator KEMPWW4VICLPAssistant Treasurer10—They have made a commitment to pay at least $7,000. If the states wish to go further, that would be a matter for the states. Nothing would prevent them doing that.11:43:005090Margetts, Sen DeeSenator MARGETTSDX5WAG(WA)00—The minister said that owners of existing houses would benefit from the GST induced rise in home values. What has been the estimated GST induced rise in existing home values?11:44:005090Kemp, Sen RodSenator KEMPWW4VICLPAssistant Treasurer10—The cost of owning a home has been estimated to rise by just over two per cent. In terms of the wider question you have asked, we have not got an estimate of that figure.11:45:005090Sherry, Sen NickSenator SHERRYZW4TASALP00—I want to ask a question of Senator Bartlett, who is moving this particular block of amendments. Division 169-1 subclause (6) says:Where new residential premises are supplied to you on real property which you acquired as a taxable supply; the amount of the GST paid on that taxable supply will be added to the GST payable for the purposes of calculating the rebate available under this section.I wonder if Senator Bartlett could outline what exactly that means.11:46:005090Bartlett, Sen AndrewSenator BARTLETTDT6QLDAD00—I do not have my wave of six advisers at my left ear to assist me on this one, so I am just reading through it as I am standing here.WW4KEMPSenator Kemp—Would you like to borrow one?DT6Bartlett, Sen AndrewSenator BARTLETT—Are they any good?WW4KEMPSenator Kemp—They are excellent.DX5MARGETTSSenator Margetts—They will only advise you against your amendments. They won't help you explain them.DX5Bartlett, Sen AndrewSenator BARTLETT—That relates to calculating the amount of GST payable in terms of calculating the rebate that is available. As I think I said earlier, the rebate is based on the initial purchase price without legal fees and the GST section of the price, so that is a component of calculating that available amount.11:47:005090Sherry, Sen NickSenator SHERRYZW4TASALP00—I do not have my adviser next to me. I might say that I accept that it is a bit more difficult for Senator Bartlett, because the Democrats are not placed physically to receive advice readily from their advisers. But I am frankly not able to follow your explanation, nor are our advisers. We are somewhat confused about subclause (6). We do not believe that the explanation you have given so far is adequate in enabling us to reach an understanding of what exactly the meaning of subclause (6) is.I would like to make a few general comments about the block of amendments we are considering at this stage. The block of amendments moved by the Democrats go to housing ownership renovations. What is obviously important to note about the effect of a goods and services tax is that it represents a new barrier to home ownership in this country. The price of housing and housing related other property services goes up as a result of a goods and services tax. Senator Margetts rightly pointed out in her earlier contribution that housing—and there is obviously an associated flow-on to rental increases—is one of the necessities of life. A roof over your head, food, clothing and power are all part of the necessities of life. The goods and services tax represents a new and additional barrier to home ownership in this country, to the great Australian dream of owning your own home. This is a further example of the unfair impact of the goods and services tax on Australians.Some other aspects of this cause the Labor Party concern. The government estimated that the initial price impact of a GST would be 1.9 per cent—10 per cent GST but they claim that the price impact would be 1.9 per cent. However, this is the old pea and thimble trick. They excluded from that 1.9 per cent general price increase the impact of housing prices and the impact of the increase in tobacco. If you include those two areas, the increase in prices as a result of a GST is at least 3.1 per cent. There are other issues that are not relevant to this debate.I highlight that point to the Senate, because it is part of the con job that the current Liberal government and Senator Kemp have been involved in in attempting to convince people that the goods and services tax is good for Australians when it is clearly not. As I mentioned earlier, a rise in housing prices obviously has a flow-on effect to rents, because if the cost to purchase a property increases—as it will under a GST—rents will obviously rise. What I am sure will occur is that existing owners of property will also increase rents—general rents will go up as a consequence of a GST, even for those people who currently own property.We do not accept the government's figures that are outlined in the ANTS package. The claim is made that for the ownership of dwellings—I think it is 77.1 in the tables—there will be a price increase of 2.3 per cent and that for other property services the price increase will be 6.7 per cent. Labor believes that is an underestimation. I think Senator Bartlett did refer in his earlier comments to other studies that have been carried out by other modellers about the price impact on housing and associated property services. We believe these figures again have been massaged and deliberately minimised to understate the impact of a GST on the housing and associated residential services and rentals sectors.On the question that I asked Senator Kemp: the government, in an attempt to massage this con job on the Australian people, has said that it is going to provide a $7,000 rebate to first home owners. But what is going to happen to this $7,000 rebate? It is going to be eroded over time—if Treasury and this government do not cut it out in some future budget. This $7,000, which is vital to minimising the impact, for people who do not own property, of a GST on their future housing purchases, is not set in concrete.This is yet another example of an alleged compensation that will be eroded over time. The $7,000 is a fixed money figure. It is not indexed. There is not even an attempt to index the $7,000. If this package passes, I am sure that Treasury and Finance and this government in its approach to expenditure will cut out this $7,000—which will obviously erode over time—at some future date. That further adds to our concerns about the impact of a GST on housing.Of course, Senator Kemp gives us the bland assurance that, okay, the $7,000 payment to first home owners is not indexed but that the states can pick it up and pay more. But we all know the pressures on state government budgets, and it is extremely unlikely that the state governments will be indexing this $7,000 payment to first home owners, and it is extremely unlikely that they would add to it. So we would get into a situation where the Commonwealth would say, `Well, you've got the GST money. You maintain the real value of the $7,000 compensation for first home owners or even increase it beyond $7,000,' and the states will say, `But we haven't got the money to do it.'This is just another example of the government short-changing in the long term those Australians who do not own property. The GST is yet another impost barrier to that great Australian dream of home ownership, and this is but another significant example of why the Australian Labor Party opposes outright a goods and services tax and its introduction into this country.We have just concluded a debate on food. I have made some remarks on that aspect. Food, housing, electricity prices, clothing and a whole host of other reasons—such as the lack of compensation that will last for pensioners, the increase in inflation, the failure of a GST to deliver any increase in employment in this country, and numerous other reasons—lead Labor to the conclusion that the GST should be opposed and voted down. And that is what we intend to do when we come to the conclusion of this debate.As I have said on previous occasions—and I do not want to take the time of the Senate unduly and I do not intend to make any further remarks on this block of amendments—Labor does not believe that you can produce a soft and cuddly GST. You cannot go through and seek amendments to this package and produce a soft and cuddly GST. It is bad for the economy, it is bad for employment, and it is bad for a whole host of other reasons—and that is why it should be voted down.DX5MARGETTSSenator Margetts—Not ever amendable?ZW4Sherry, Sen NickSenator SHERRY—We had that debate yesterday, Senator Margetts.11:57:005092Bartlett, Sen AndrewSenator BARTLETTDT6QLDAD00—Firstly, to respond to Senator Sherry's question previously, I am sure that the information I give may assist him in his deliberations about how to vote on this particular amendment, and so I have wanted to make sure I gave him the correct interpretation rather than something completely off the top of my head. Basically, it relates to providing for increasing the amount of rebate available when people buy, lease or get supplied, as it is defined, new residential premises on land they had already acquired as a taxable supply.The amount of GST they had already paid on that property will be added to the GST payable on the new residential premises. That would be added to the amount already there, for the purposes of calculating the rebates. So it means that the extra amount on the GST paid on that taxable supply—that is, the property—would be able to be added to the amount of rebate that could be claimed, by increasing the amount of GST payable for the purposes of calculating the rebate. That is four times as many words as are in the paragraph in question, but that is basically what it means.I do want to emphasise again the importance of this area. The phrase `the necessities of life' has been thrown around a lot throughout the community in relation to tax issues in general for very many years, and housing is obviously a significant component of that. It cannot be overemphasised how crucial it is that, when we make changes of any type to the tax system—let alone one as comprehensive and fundamental as that which is being proposed here—we should clearly assess the potential impacts on such a crucial commodity as housing.The Democrats have already indicated that, given the Senate's rejection of our amendments relating to food, we are unable to support the legislation. So we will certainly be joining with other people in voting against these bills in the final vote. But we still see it as important to do what we can—in the event that, despite the Democrats' opposition, enough other senators support the legislation that it passes—to see that other serious and significant flaws in the legislation are addressed.Clearly, the famed warm and cuddly GST is now no longer achievable because the big, ugly spike of food tax is still in there. For that reason amongst many, the Democrats will not be able to support it. Nonetheless, if the Australian people are forced to embrace a GST, we still see it as our duty to try and remove as many as possible of the spikes that may be skewering into them when they are embracing it, against their will or otherwise. That is why we believe these, and the rest of the Democrat amendments that we will still be moving, are important, and we urge the Senate to give full consideration to them.During the previous extended debate on the issue of food, the government made a lot of mention of the fact that a number of business organisations oppose the Democrats' approach in relation to food. Those organisations were used by the government to back its case for not exempting food. Not unreasonably, I think that in this case it would behove the government to look at what the industry groups which are involved in housing have been saying about this issue. On this issue there has been widespread criticism from business groups involved in housing about the impact of the government's tax package as it is structured at the moment and about the flaws in the First Home Owners Scheme as it is structured at the moment. The Housing Industry Association is the most prominent of those and I would suggest it has been the most vocal. To its credit, I think it has also been the most constructive in not just sitting off to one side and complaining that the government has stuffed it up but working hard and putting a lot of resources into coming up with a realistic, workable, fairer alternative which also does not impact significantly on the budget bottom line.I think it should be congratulated for that, as should other housing organisations in the community, groups such as National Shelter and the New South Wales Federation of Housing Organisations, which have also put a lot of work into this issue. Those are community organisations rather than businesses. For whatever reason, the government often seems to think that community organisations are nice, well-meaning amateurs who really do not know what they are talking about and that we have to listen only to those engaged in making money and operating businesses. The Democrats reject that viewpoint. Indeed, we would suggest that in many cases community organisations which are involved in an issue on a non-profit basis and purely from a viewpoint of trying to achieve the best possible social outcome have a very important role to play in terms of government taking on board what these organisations see as potential impacts.They also have an enormous amount of expertise. Indeed, the housing sector in the community—I was going to say it is well resourced, but it is certainly not well resourced—has one of the greatest degrees of expertise available amongst the non-profit community sector groupings in Australia. These organisations provide a great degree of policy initiative, and a great degree of expertise is brought to bear in analysing the impact of housing policies of various governments, or the lack of action by various governments and by industry on housing issues. The Housing Industry Association has drawn on the expertise in the community sector in ensuring proper analysis of this aspect of the taxation package.It is not a minor matter, it is a crucial matter. I again emphasise that in this case commercial organisations, business organisations, have pointed out the flaws in the government's First Home Owners Scheme and have pointed out some of the potential negative impacts on various aspects of the housing market. Some of those are outlined in the Senate Community Affairs Committee report. It details clearly that in this case the businesses with expertise in housing issues have been quite critical of some aspects of the tax package relating to housing issues. The MBA, as well as the HIA, has brought forward significant criticisms. I think they need to be recognised, particularly in the context that Senator Sherry alluded to, which is that the amount of modelling and investigation done by the government in this area has been minimal.I point briefly to the component of the Senate Community Affairs Committee report which spoke about the government's own estimates in this area. The report was extremely critical about that. There was a particular exchange from the committee hearings which took place in Canberra in February with officers of the department. There was questioning from members of the committee about what modelling had been done. Senator Chris Evans asked, `What about the flow-on to the cost of rents? Has the department done any work on that?' The departmental officer responded, `We have not done any modelling on the impact of the GST.' So all of this is based on Treasury modelling. Even on the flow-on to public housing there was no work done by the department responsible for housing issues and specifically for public housing. It was basically left to the public housing authorities. The departmental officer said, `The public housing authorities are doing a lot of work at the moment to identify the impacts on them.' This is work that was being done obviously many months after the tax package was put into place and was introduced into the parliament. This government was leaving it up to state housing authorities to try and figure out what the impacts were going to be on them.Fortunately, the government have moved some way on this in relation to the amount of money they were offering under the Commonwealth-State Housing Agreement. Inasmuch as they have moved forward at all on that, certainly the Democrats are congratulating them for that. As I think was pointed out earlier, the amount of funding available under the Commonwealth-State Housing Agreement—firstly in terms of the amount extra that has been offered as recognition, if you like, or as compensation of the extra cost impacts of the GST—is seen by most people to be not meeting the full costs. Presumably, it is based on just another one of those Treasury underestimates. So there is an issue whether or not even a basic appropriate amount has been allocated to state public housing authorities to cope with this obvious cost impost that is going to occur.There is also no indexation over time of the Commonwealth-State Housing Agreement as the offer has been put forward at the moment. Indeed, there is the wonderfully named `one per cent efficiency dividend' where funding is reduced as a reward for efficiency. So the value of the amount over time will decrease with no indexation. If the Senate refuses to support these Democrat amendments, the CPI impact will clearly be higher than it would otherwise have been. That obviously means that the lack of indexation will impact more significantly and more quickly than it otherwise would have. So there are significant negative impacts on many different aspects of the housing market. Whilst it is called a housing market, it is about providing basic shelter and accommodation for people and in some ways the fact that it is a market does not necessarily help to deliver that crucial basic social outcome.So I and the Democrats again emphasise how crucial this issue is, partly because of the inadequacy of the government's modelling and the government's investigations into the likely impacts on all the many different components that make up housing in Australia. The Democrat amendments go straight to the heart of that issue. They provide, as I said earlier, a significant incentive for ensuring that people in private rental have their homes at an adequate standard, that standards available there do not decrease. They will certainly assist the public housing authorities, who are struggling under the inadequacies of the Commonwealth-State Housing Agreement as it currently stands, to address the very important role that they play.Housing costs, I probably do not need to remind the Senate, are a fundamental component of poverty levels in Australia and, as the Democrats have pointed out both before and after the budget of this week, a tragic lack of attention is being paid to the need to tackle poverty in this country. It is all very nice to have good looking budget figures, but research continues to show it is increasing. Indeed, the Queensland Council of Social Service released a report just last week, a week before the budget, showing that poverty levels are still increasing. Housing is a significant component of that. The degree, the size, of housing costs for people on lower incomes is a significant reason why that degree of poverty is still increasing and why the gap between rich and poor is increasing. If we fail to address those issues at their source—and that is what, unfortunately, this legislation will be doing if it is not amended to address some of those flaws—we may well be contributing further to the increase in those poverty levels.12:10:005094Murray, Sen AndrewSenator MURRAY3M6WAAD00—I just want to add briefly to the remarks from Senator Bartlett. With all the media and public focus on food as the core of the essentials of life argument, this housing area has indeed been missed out. This is the second most important set of amendments that the Democrats are introducing to address the area of the essentials of life, and the reason I have risen to my feet is to make very clear the different emphasis we have tried to apply in these amendments.The issue of the first home rebate scheme offered by the government is another one of compensation. As we have said and as other senators have said endlessly in this debate, compensation is necessary because the GST is a regressive tax. You do not give compensation—you do not give a handout—unless there is a problem. You have addressed the problem with your home buyers scheme but we feel that it is poorly targeted. The reason we feel it is poorly targeted is that, for those people on the lowest quintile of income, for those people who are poor or disadvantaged or on lower incomes, rental premises is what counts, not new homes.If it is rental premises, it means that they are leasing from commercial providers of rented homes or from public providers of rented homes. What we have tried to do is limit the financial disincentive which presently exists in your scheme for landlords to perform needed renovations, alternations, additions or repairs to their rental properties. Under the GST, leased residential premises are input taxed and landlords will pay GST on the goods and services they acquire but they cannot claim an input tax credit for that GST. There is no GST charged on rents, which is a good policy, but still there is a financial disincentive for landlords to renovate and to improve the residential premises available for that income sector.The reason I say it is our second most important set of amendments on the essentials of life, in trying to make the GST a far fairer tax, is that 19.3 per cent of all expenditure by lower income people is on housing and it is primarily on residential rents. So my question to the minister is: if on the one hand you have the compensation policy approach you adopted in your ANTS package, how have you addressed the other public policy—the social policy needs—of encouraging, incentivising, residential, leased premises improvements and the provision of residential leased premises? We think our amendments do just that and we are certain, from the evidence that has been provided to us, that your amendments do not. Surely you have a social obligation to encourage the provision of a better and a greater supply of more rented homes as well as the obligation to compensate for a regressive tax which hurts the poor?12:15:005095Cook, Sen PeterSenator COOKRF4WAALP00—I think the Democrat amendments touch on a very important point. Our position on these amendments will be as previously stated, but this is an important point—one on which the general community has again been misled by the government into thinking that there is a soft cushion here for first home buyers. Essentially, there is not. We do know that already in the real estate pages of every capital city daily real estate agents are advertising, `Buy a house before the GST inflates prices.' They are trying to encourage—and it is in their interests because they get a commission on every sale—people to buy before the GST.The question is: do people need to buy before the GST? Is it a credible threat that the GST will increase prices? The answer is that it is an entirely credible threat. The real estate agents are right: houses will be more expensive after a GST than before a GST. People who want to buy a house for the first time, young home buyers who are in the market to buy a house that is built and are not building their own house, will have to buy in an inflated market because the housing stock will have risen in price because of a GST. The government recognises this. There is no dispute that prices will be higher because the government has recognised this by providing, once again, what it calls `compensation'. Compensation is not available to all home buyers—it is to first home buyers. On a scale of priority, if you are awarding compensation, certainly first home buyers have a very high claim. But they are not the only people who have a claim. If a pensioner or a low income earner is in fact lining up to buy their second home, the price for their second home will be higher. There is no compensation for that class of home buyer.WW4KEMPSenator Kemp—The price for the first home will be higher.RF4Cook, Sen PeterSenator COOK—The interjection from the minister is that the price for their first home is higher, so they have pocketed the windfall gain from the first home to the second home. That assumes they are selling a home to buy a home. But a lot of people who have fallen on hard times have already sold their home and are renting. If they are trying to claw their way back up and they are going to buy again, for that group of people certainly the prices will be higher. There is no recognition of that group in the compensation package, and they will just have to find the money somewhere or go without. That explains, once again, the attitude of this government to those who really do need to have their interests considered by a parliament that expresses compassion for the lower paid and for the ordinary middle income Australians as well.The $7,000 first home owners rebate is, of course, uniform across Australia. What do we know about housing prices across Australia? We know that the premium market is in Sydney. The median price for a house in Sydney when I last looked was around $350,000 whereas the median price for a house in a city such as Adelaide was around $185,000. So if you are a first home buyer buying a home in Sydney you get $7,000, which is, as a percentage, of far less value to you—and not enough to offset the impact of a GST in any case—than it is to a person buying a house in Adelaide. Maybe the government's answer to that is, `Move to Adelaide.' That is also a practical impossibility for many people in this situation. That leads me to a question I have for you, Minister, and I would be grateful if you would be kind enough to provide an answer for it.WW4KEMPSenator Kemp—I always do.RF4Cook, Sen PeterSenator COOK—I notice your nod in the negative, but I took it to be affirmative. Is the $7,000 first home owners rebate means tested or not?12:20:005096Kemp, Sen RodSenator KEMPWW4VICLPAssistant Treasurer10—The short answer to your question is yes; so I think I have covered that. If anyone else wants to speak, I will come back and answer those questions.12:20:005096Bartlett, Sen AndrewSenator BARTLETTDT6QLDAD00—I will not delay the vote on these amendments for long, but I did have a question for the minister in relation to the impact on private rentals specifically. An issue that came up a lot in the Senate Community Affairs Committee and, I am sure, in the other committees was how we stop people profiteering and unfairly increasing their prices. The ready response from the government is: `We've given extra powers to the ACCC and monstrous fines that we are going to clobber everyone on the head with when they do it.' I am interested to find out from the minister how the government sees that as operating effectively in the private rental market if you have private landlords putting up their rents by 10 per cent.As I have indicated, a number of community organisations have suggested that in some parts of the country some private rentals may go up by 10 per cent in any case. How will the government be able to determine if some individual landlords are profiteering by increasing rentals by 10 per cent or if they do renovations—which, if these amendments do not get up, will obviously be subject to GST and potentially increase the costs of renovations, modifications or repairs—that they are using that as a justification for extra rent hikes as well? Does the government see any prospect of adequately policing profiteering of private rentals being put up by unfair levels, particularly given the government's great aversion over many years to any form of rent control or legislated control over rent rises or rent levels? Clearly, that option is not possible. How are you actually going to catch these people when they try to rip off tenants?I am not suggesting all landlords are evil vermin trying to suck the blood out of poor hopeless tenants or anything like that. I am talking about the occasional small number of individual landlords who may be doing the wrong thing and see it as an opportunity to whack their rents up. In certain rental markets around the country, they would be able to do that and the market would bear it. In those circumstances, how will that be adequately policed? They could quite often be private citizens who own just one or two rental properties rather than commercial operations managing tens or hundreds of properties. Do you believe that that can be adequately policed under your overall tax package?12:23:005096Cook, Sen PeterSenator COOKRF4WAALP00—Since we are taking the questions as a group, my first question was: is the $7,000 first home owners rebate non-means tested? When I asked that question, I heard a voice from your adviser's box say no, and then I heard you say no, Minister. I thought this was another opportunity for the advisers to get into the Hansard and create a record.WW4KEMPSenator Kemp—That is very unfair.RF4Cook, Sen PeterSenator COOK—I do not mean it unfairly.WW4KEMPSenator Kemp—Three strikes and he's out.RF4Cook, Sen PeterSenator COOK—I would not say that. I think he is a very good adviser and you should keep him.WW4KEMPSenator Kemp—Well, stop trying to drag him into the debate.RF4Cook, Sen PeterSenator COOK—I am just trying to embarrass him, which I think I have done. I can now move on. This means that everyone gets the same rebate, irrespective of income. I know there is a Liberal Party philosophy of equality here. The truth is that not everyone is on the same income. If a millionaire who is buying their first home gets a rebate of $7,000 from the Australian taxpayer, I would query: is that fair? It is middle and low income earners who pay tax in this country. If a millionaire buying his or her first home is going to get a $7,000 rebate, that is a transfer of income from middle to low income earners to the wealthy. Would you agree with that, Minister? And, given that I suspect you would—because the logic is ironclad—why does the government persist in redistributing income from the poor to the rich, as it is proposing to do in this situation?12:26:005097Kemp, Sen RodSenator KEMPWW4VICLPAssistant Treasurer10—A number of issues have been raised by Senator Murray. Senator Murray was concerned about the effect on leasing and what encouragement there would be in this package to improve leasing. Is that a fair summary of what you were saying?3M6MURRAYSenator Murray—I was suggesting that our approach is better.WW4Kemp, Sen RodSenator KEMP—I think your approach is not better. I think it is unfair, and it is certainly discriminatory against first home owners, which the government seeks to target with this particular measure. We do not think that is the case. Because it is less targeted, it benefits higher income and lower income earners but does not benefit the group which we think is the key group to compensate, given the nature of the package.Rental costs will probably rise by about 2.3 per cent. In a competitive housing market, we are providing very substantial compensation for individuals—we are offering the largest tax cuts in Australian history. It is obscure to us why people in the Senate wish to oppose such large tax cuts. These are the largest tax cuts ever offered, I believe, in Australian history. We have a major compensation package for people on pensions and benefits and an up-front four per cent increase and guaranteed 1.5 per cent rise above the CPI. It is a very significant and important compensation package. In relation to rental costs, the figuring we have done suggests it is about 2.3 per cent.In relation to the monitoring of prices, Senator Bartlett indicated there is a section in the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations which the states will be adopting to ensure that the monitoring of prices applies to the whole economy. The states and territories will be taking action to adopt the schedule version of part 5B of the Trade Practices Act 1974 and part X1AA of the new Tax System Price Exploitation Code to extend the measures in part 5B to cover those areas outside the Commonwealth's constitutional power. So the states will be enacting complementary legislation.Senator Cook, would that we had more time to debate all this vigorously, but not at this particular moment in this chamber. Let me just assure you that we have looked closely at this. We have decided to provide $7,000 compensation for first home owners. This applies to the cost of a $150,000 house. We think it is fair and appropriate. It has been carefully researched and the government stands by its decision.12:29:005097Cook, Sen PeterSenator COOKRF4WAALP00—I know you think it is fair, but if a millionaire first home buyer gets $7,000 as compared with a first-time first home buyer on an ordinary salary getting $7,000, and if the tax burden is borne by middle and low income earners, that is a distribution of income from the middle to low income earners to the wealthy. I accept that that is what you think is fair, but I do not think it is fair and I think most Australians would also agree with me.Sitting suspended from 12.30 p.m. to 1.15 p.m.13:15:005097Cook, Sen PeterSenator COOKRF4WAALP00—As we broke for lunch, we were discussing the somewhat skewed view the government has of fairness. Before the chamber are amendments from the Australian Democrats to change the GST package with respect to housing. The government's defence to the allegation of unfairness in its treatment of home buyers is that it has provided a $7,000 first home owners rebate. My question to the minister was: is that rebate means tested? His answer is: no, it's not. The only conclusion is, therefore, that since middle and low income earners pay most of the taxation collected by the government in Australia, and there is no rebate or means test on the First Home Owners Scheme, then a wealthy person—a millionaire—can claim the $7,000 rebate just as a middle or low income earner can, and because of where tax is collected from—which class of income it is collected from—that is a redistribution of wealth from middle and low income earners to wealthy people.The government says that is fair, and I accept that is the Liberal Party definition of fairness. But there is a budget allocation for the amount of money for first home owners to presumably meet this $7,000 grant. Wouldn't it be fairer, Minister, given the higher prices that are occurring now in the real estate market, to draw the line somewhere and say, `People above a certain income level will not attract the rebate,' and provide a better and bigger rebate for people below that level? Wouldn't that be fairer? Why should, for example, Jamie Packer, if he was buying his first home, get $7,000 from middle and low income earners, and a middle and low income earner get the same amount?13:17:005098Kemp, Sen RodSenator KEMPWW4VICLPAssistant Treasurer10—I do not think you understand. It is capped at $7,000 and, therefore, a person who buys a lower value house gets the higher proportional benefit from this scheme. We have capped it at $7,000. We think this is a fair system; we think it is a carefully targeted system, and it deals with an issue that came up in order to make sure that first home buyers were not adversely affected. It is a capped scheme—that is a well-known way of dealing with these things. Lower income people will presumably not be able to buy as expensive a house as higher income people; therefore, it provides the greatest proportionate benefit to that category.13:18:005098Cook, Sen PeterSenator COOKRF4WAALP00—That is one way, but you would agree with me that another way which would be doubly beneficial would be to also means test it. However, let me move on. If you regard that arrangement as fair, why do you regard it as fair that, in calculating the inflationary impact of the introduction of a 10 per cent GST on just about everything, you exclude housing costs? The figure of 1.9 per cent that you tell us is the inflationary impact of a 10 per cent GST is, as we now know, not true—that is, the inflationary impact calculated by the Department of Treasury for the second year of the GST. In the first year, the Treasury's calculation of inflationary impact is 3.1 per cent based on a set of assumptions that are challengeable, and the realistic inflationary impact is probably more like four to five per cent. But in calculating your figure of the inflationary impact, you exclude housing; and we now know—and you have confessed it, or confirmed it—that housing prices will be higher under a GST. Why are you excluding from inflationary impacts the question of housing?13:20:005098Kemp, Sen RodSenator KEMPWW4VICLPAssistant Treasurer10—Senator, let me make it clear. The government wants a fair scheme; it wants a simple scheme. The government is very aware of the incentive effects that come with withdrawal rates and means testing. What we are doing is providing a capped scheme which is well understood. It provides a higher proportionate benefit to people who purchase a lower value house than, say, to wealthy people who might purchase a higher value house. We have had long debates on the inflation figures, both in the committee and elsewhere, and we have excluded housing costs, as you know, because we have a First Home Owners Scheme which provides compensation to first home owners.13:21:005098Cook, Sen PeterSenator COOKRF4WAALP00—Just to tie this point down—it is probably my last question; and I am happy, subject to any further debate in the chamber, to go to a vote on this proposition: firstly, you acknowledge housing prices will be higher because of a GST—that is a matter that is now established—and you compensate for first home owners by a scheme or a grant which in some cities may meet their needs but in other cities will not because of the varying prices of entry into home ownership. In Sydney it is much more pricey to buy a house than it is in Adelaide, Perth or even here in Canberra. One size fits all—so they all get the same rebate. You will not put a means test on that so that the wealthy get the same as middle and low income earners, and you think that is fair because of the cap. But you exclude the price of housing from your inflationary calculations as to what the real price of the introduction of a GST will be. Can I be absolutely sure about this: your reason for not calculating into inflation the higher prices of housing because of a GST is simply because you have got this scheme? Is that the only explanation you can provide?13:22:005099Kemp, Sen RodSenator KEMPWW4VICLPAssistant Treasurer10—I note that this is your last question, and I hope that this is the case. I noticed that Senator Sherry said that he was not going to make a further contribution, and I rather unwisely assumed that was the end of the Labor Party contribution. I will not make that mistake again.We exclude the full housing effect because we do not include in the First Home Owners Scheme payments on the benefit side of the cameos which we released. The First Home Owners Scheme feeds into the amount a person needs to borrow, which feeds into the CPI calculation. I understand that this was the subject of quite close debate and examination before the committee and—correct me if I am wrong—I understand that both Warren and Harding accepted this analysis.13:24:005099Murray, Sen AndrewSenator MURRAY3M6WAAD00—I am a bit perplexed by the minister's logical principles, which seem to move about according to the amendment that is before him. I seem to recall that, under the food amendment, one of your major criticisms was that the benefit of making food GST free was that a lot of that benefit also went to the rich. But then we come to the first home rebate scheme and, suddenly, that is alright. It is like the income tax cuts: we are going to give 52 per cent of the income tax cuts to the top 20 per cent, and 48 per cent is going to the rest. Why is it all right for income tax cuts and for the first home rebate scheme but not all right for food? I get confused with your logic and principles. Is it that you will suit the argument to whatever is the particular position that the Treasurer has told you to support?13:25:005099Kemp, Sen RodSenator KEMPWW4VICLPAssistant Treasurer10—I am a bit shocked at Senator Murray starting off on such an aggressive plane. Normally you do not impute ill-motive to people when you make a contribution. I am a member of the great political profession and, as you know, we always stick hard to our principles, and my principles are well-known. There is a very big difference in principles, as you would understand because you are a very bright senator. Although you do not accept our view on food, and you seem to have blocked your mind to all the evidence that was given, we understand that there was an ideological principle position which you felt you had to adopt and, in the end, everyone has to live by their decisions.This is a capped scheme; it is $7,000. It therefore provides the greatest benefit to first home owners who purchase lower priced houses than those who purchase higher priced houses. That is very different from the equity argument which was run. I raised this question two or three times. I do not want to open the debate again but, from what I could see, all the evidence that was given to the committee in respect of GST-food suggested that you were using `a very blunt instrument' with which to tackle compensation issues. That is not my quote—it is from the evidence that was given to the committee. The evidence that I quoted from New Zealand and from the USA showed that most of the benefits of that flowed to the higher income earners. That is very different.I have not been running contradictory arguments; I have been entirely consistent, Senator Murray. I think it is perhaps you that needs to look more closely at your logic rather than I at mine.13:27:005099Bartlett, Sen AndrewSenator BARTLETTDT6QLDAD00—Given that I was the mover of this range of amendments, I would like to emphasise again that it appears, unfortunately, that these amendments are not going to be successful, and that is a great shame. What we are seeing is a constructive attempt by not just the Democrats but also community and industry organisations to address a significant problem in the tax package and to put forward a constructive alternative proposal that is properly costed, that will not cost extra money, that is much better targeted and that addresses many more of the potential problems and potential cost flow-on effects in the many different components of the housing market. Unfortunately, at least to date, all the Democrats' attempts to take a constructive approach on this taxation package have not been taken on-board.It is a great shame that the government has ignored the views and the concerns of housing industry groups and community based housing organisations. This cuts across its rhetoric in other areas where it uses the support of business groups to justify its need to stick to the components of its packages. Industry organisations with specific expertise in the housing area have pointed to the inadequacy of the First Home Owners Scheme in that it has not been adequately targeted and is not doing enough to counter the increased cost flow-on effects.I am particularly concerned about the impact on the private rental market. The Democrats' rebate would have reduced significantly the potential for increased housing costs for people that own rental properties and that, of course, would have been passed on to tenants.Another comment that the government is fond of making frequently in many different contexts in criticising the Democrats is that somehow or another we do not understand market forces or business or economics and that we do not have any real world experience. I do not think the minister has made that comment today—he is being very restrained—but it certainly is a frequent comment. If you are seriously suggesting, even if you accept the basic costing, that there will be a 2.3 per cent increase in housing prices as a result of this tax package and that that will lead automatically to an equivalent 2.3 per cent rise in private rental rates uniformly around the country, then I suggest that it is the government that does not understand economics, business and markets rather than the Democrats. I hope I do not have to hear that comment again.10000TEMPORARY CHAIRMANThe TEMPORARY CHAIRMAN (Senator Crowley)—The question is that the Democrat amendments 1, 3, 4, 5, 6, 7 and 9 to 11 be agreed to.13:35:00The committee divided. (The Chairman—Senator S.M. West)9Allison, L. Bartlett, A. J. J.Bourne, V. *Brown, B.Lees, M. H. Margetts, D.Murray, A. Stott Despoja, N.Woodley, J.50Abetz, E. Bishop, T. M.Boswell, R. L. D. Brownhill, D. G. C.Calvert, P. H. Campbell, G.Carr, K. Chapman, H. G. P.Cook, P. F. S. Coonan, H.Cooney, B. Crane, W.Crossin, P. M. Crowley, R. A.Eggleston, A. Ferguson, A. B.Ferris, J. Forshaw, M. G.Gibbs, B. Gibson, B. F.Heffernan, W. Herron, J.Hogg, J. Hutchins, S.Kemp, R. Lightfoot, P. R.Lundy, K. Macdonald, S.MacGibbon, D. J. Mackay, S.McGauran, J. J. J. Minchin, N. H.Murphy, S. M. O'Brien, K. W. K.O'Chee, W. G. Parer, W. R.Patterson, K. C. L. Payne, M. A.Quirke, J. A. *Ray, R. F.Reid, M. E. Schacht, C. C.Sherry, N. Synon, K. M.Tambling, G. E. J. Tierney, J.Troeth, J. Vanstone, A. E.Watson, J. O. W. West, S. M.Question so resolved in the negative.13:38:005101Margetts, Sen DeeSenator MARGETTSDX5WAG(WA)00—The running sheet has a Greens (WA) amendment on sheet 1392 next for clauses 38 to 38-10. That amendment deals with the issue of acupuncture in an attempt to ask for an exemption, but the preferred option of the Greens (WA) relates to our amendments 2, 3 and 5. The amendment on the issue of acupuncture is our second preference. Our group of amendments 2, 3 and 5 has the same intent as the Democrat amendments 1 and 8 and a couple of other subsequent amendments. It would therefore be sensible for me to defer to the Democrat amendments 1 and 8 and, if they do not succeed, I will then ask to move Greens (WA) amendment 1 on sheet 1392.13:39:005101Bartlett, Sen AndrewSenator BARTLETTDT6QLDAD00—by leave—I move Democrats' amendments on sheet 1348:(1) Clause 38-10, page 79 (after line 9), after table item 4, insert: 4A Complementary medicine[complementary medicine](8) Clause 195-1, page 271 (line 19), at the end of the definition of recognised professional , add: ; or (d) in the case of services covered by item 4A in the table—the service is supplied by a person who is accredited as a member of a body listed in Schedule 1 of the Therapeutic Goods Regulations.[complementary medicine]These two amendments relate to complementary medicine. Until this committee inquiry got under way and I started getting submissions on health issues, I had previously used the term `alternative medicine'. If I lapse into that term, please replace those words with `complementary medicine'.These amendments make complementary medicines GST free where they are provided by a practitioner who is a member of a recognised professional association. The legislation presented by the government lists a range of health services that are GST free. It lists particular services in a table, including chiropody, dental, dietary, nursing, occupational therapy, osteopathy, pharmacy, psychology, social work, speech therapy, speech pathology, podiatry and a few others. The first amendment simply seeks to insert complementary medicine amongst those other services. The second amendment includes an enhanced definition of `recognised professional' for those people in complementary medicine services where the services are provided by a person who is accredited as a member of a body listed in schedule 1 of the Therapeutic Goods Regulations.Natural and complementary medicine is an important part of Australia's health care system. It is not some obscure fringe activity. It is widely used by many Australians. More and more Australians are using a range of so-called non-mainstream medicines such as herbal medicine, acupuncture and naturopathy and are benefiting from using these types of health care. I am sure that all of us have had personal testimony from members of the public about the benefits they have found from using this type of health care and how it suits their needs. When we are making major changes to our taxation system—legislation does not get any more major than this—it is important to reflect the changing face of health care in Australia and people's increasingly diverse choices of health care. It is important to ensure that we do not do anything to negate the availability or affordability of those choices.Complementary medicine helps people to remain healthy and avoid further illnesses. It has a strong preventative focus, which is something that mainstream medicine is sometimes criticised for not having. Any type of medicine that prevents future illness, as complementary medicine clearly does, saves costs elsewhere in the health budget. The Democrats support Australians in choosing complementary medicine and recognise that consumers of complementary medicine do not already receive government subsidies for these services. We do not believe that these consumers should face a further financial burden because they choose a mode of health care that is outside the mainstream medical model.Imposing a GST on complementary medicine would be discriminatory and contrary to competition policy. It would assist one section of the market over another. It would discriminate in favour of doctors who can perform or prescribe complementary medicine and then claim Medicare benefits as with ordinary consultations. This discrimination results in anomalies. Complementary medicine services such as acupuncture are GST free when provided by a hospital or a doctor but incur a GST when supplied by a trained acupuncturist who is likely to be highly trained, more experienced and more skilled in this area. That is not a reflection on GPs who practise acupuncture; it is simply a statement of fact. Trained acupuncturists who practise solely in that field tend to have more training than GPs in that specific discipline.Evidence provided to the Senate Community Affairs Committee, which I was the Democrats member on, was that people may decide to go to bulk-billing doctors instead of natural therapists in order to receive a GST-free and heavily subsidised service. This would represent an increase in the costs of Medicare and would not result in an optimum use of health resources. It is important to note that some types of complementary medicine, such as acupuncture, are more commonly used than many of the health services specified by the government as being GST free—and I read through some of those earlier. Acupuncture, to focus on that one specifically, has been widely accepted as a mainstream health service. Rebates are paid by all but one national health insurer for acupuncture services. A number of health insurers also rebate for other complementary medicine services, such as Chinese herbal medicine. Many rebate for the specific skilled provision of massage therapy as well.The amendments that the Democrats are moving today would bring this legislation into line with what is already occurring in the community. We are trying to create a tax system for the next century. To put it mildly, we think it is short-sighted to not have this brand new, whizzbang, new millennium tax system up to speed with where the community already is now, let alone where it will be next century. This approach has already been picked up by the private health insurance industry. I think the Democrats' amendments are a positive move for complementary medicine and for the wider community, who will benefit from an increased choice of affordable health care options. It is another example of an attempt by the Democrats and by community organisations to genuinely participate in constructively assessing the tax proposals put forward by the government in an important area of health care.The government went to the election saying that health services would be GST free. They did not define that at the time. They had the very brief Vos inquiry to examine where to draw the line there. Senator Kemp will be relieved to know that I will not revisit the food debate, but it is another example of people saying that somehow, if we made food GST free, everything would collapse but, if we can make some health services GST free, the government think that is all right. They have had to decide where to draw the line, in the same way as you would have to decide where to draw the line if you were exempting food. Those sorts of things are not necessarily simple, but they are certainly achievable. The government have chosen to draw a line here which, in our view, leaves a very narrow definition—or perhaps an insufficiently broad definition—of health services because it leaves out a whole range of complementary medicine services.As I said at the start of my contribution, these services are widely used by many Australians. I should probably say, by way of declaring an interest in this, that I am not one of those Australians who use complementary medicine services. No doubt due to my conservative nature, I stick to traditional mainstream medicine. But I know many Australians who do use these services, and I know a growing number of people use them. I do recognise that they are important, not just because they provide and meet the health needs of many people much better than mainstream health services but also because they have a very strong preventive focus. I think that is something that should be encouraged wherever possible in health practice. It is very counterproductive to put an in-built disincentive into our taxation system.In putting forward and promoting these amendments, I also remind the Senate that it is another example of putting forward con structive suggestions based partly on information provided from the community. People in the community who have experience in these areas have tried to constructively engage and put forward constructive solutions. It is also a cost-effective solution. In our view, it would save the government money, particularly in the long term, by not providing extra incentives for people to go into the subsidised health system that currently exists and by enabling a continued expansion in accordance with the direct choices of the Australian people in their health needs. So these amendments have a lot going for them. I do wish that the government and the rest of the Senate would take them seriously. Regardless of a lot of the other debates surrounding the tax package, it is these sorts of crucial issues that we believe need to be addressed and fixed up.As I have already said previously today, the Democrats will not be supporting the overall legislation because of the unfairness that is now entrenched in it by the rejection of some of our previous amendments. I would also suggest that these are just the sorts of issues that are unlikely to be picked up in any agreement that may be reached between the government and other senators. They are more likely to be looking at the big picture items. These sorts of issues that are smaller and more discrete are unlikely to be picked up, although I certainly hope they are. I think it is essential for the Senate, in its role as a house of parliament considering proposed legislation, to consider amending these issues. I would hope that the ALP would look at them in that light as well.13:50:005103Margetts, Sen DeeSenator MARGETTSDX5WAG(WA)00—These amendments extend the current medical exemption to include complementary medicine on the register of therapeutic goods. The Parliamentary Secretary to the Minister for Health and Aged Care, Senator Tambling, is actually working in quite a constructive way in this area to find better ways of dealing with the issue and working with the industry, which is of course large and still growing. To be listed on this register, the goods must have been shown to be of acceptable safety, quality and efficacy. In addition, these amendments extend the GST- free status to medical services provided by a person who is an accredited member of a body listed in schedule 1 of the Therapeutic Goods Regulations.Why is this necessary? Complementary medicine providers are discriminated against. Mainstream doctors who practise some complementary techniques will have their services classified as GST free. This is a clear issue of equity in the same service. It also exacerbates the current discrimination that applies to mainstream doctors, who can supply complementary services and receive a Medicare rebate for doing so. Complementary health practitioners, though, do not have access to this concession for their patients. It is an issue of choice for consumers. The government has acknowledged that many people actually prefer complementary techniques and medicines in their health care regime. I think it does mean that people feel that they sometimes have a little more control in the way they choose their health care.Consistent with the government initiatives in this area—and I mentioned those of Senator Tambling; for instance, the establishment of an Office of Complementary Medicine and enhancement of a Complementary Medicines Evaluation Committee—you would think that the government would think carefully about making sure that these positive efforts are linked in their package in what is considered to be `health care'. As Senator Bartlett has indicated, complementary medicines and, indeed, preventative and community health care often mean that you have a lot fewer people end up at the pointy end, the critical end, of medical services. And that, in effect, is a very cost-effective way of keeping the community as healthy as possible. Therefore, obviously, the Greens (WA) will be supporting these amendments.13:53:005103Cook, Sen PeterSenator COOKRF4WAALP00—I have a question for the movers of this motion. Amendment No. 7 in the pack that has been moved—Nos 1 to 8—clause 38-10, omits the definition of private health insurance.DX5MARGETTSSenator Margetts—Nos 1 and 8.RF4Cook, Sen PeterSenator COOK—Nos 1 and 8?10000CHAIRMANThe CHAIRMAN—Yes.RF4Cook, Sen PeterSenator COOK—I see. I am looking at clause 195-1 on page 270.3M6MURRAYSenator Murray—It is not moved.RF4Cook, Sen PeterSenator COOK—I see.10000CHAIRMANThe CHAIRMAN—The Democrats have moved amendments 1 and 8 on sheet 1348. They relate to clauses 38-10 and 195-1.RF4Cook, Sen PeterSenator COOK—This is out of order, of course, because I have misread the running sheet. I apologise to the chamber for that. But it is in the general ballpark of medicines, and maybe if it is answered now it will save us time later. That amendment omits private health insurance, and I was wondering why that was thought necessary.13:54:005104Bartlett, Sen AndrewSenator BARTLETTDT6QLDAD00—I will take that on notice for later, if that is okay.13:54:005104Crowley, Sen RosemarySenator CROWLEYZF4SAALP00—I have some questions for the minister. Quite some days back I asked you if you could provide to me answers to question on notice from our community affairs committee and also on the outcome of people who were or were not offered a visit.WW4KEMPSenator Kemp—I have tabled that.ZF4Crowley, Sen RosemarySenator CROWLEY—That would be enormously helpful. We have been waiting very patiently.WW4KEMPSenator Kemp—I have tabled that.ZF4Crowley, Sen RosemarySenator CROWLEY—One of those questions did go to the question of national—10000CHAIRMANThe CHAIRMAN—The minister is saying that he has tabled it.ZF4Crowley, Sen RosemarySenator CROWLEY—He has tabled it? I beg your pardon.13:55:005104Kemp, Sen RodSenator KEMPWW4VICLPAssistant Treasurer10—Senator, I have tabled the response. There were a couple of questions that you raised. The one that you raised actually during the debate was the response to organisations that were offered briefing. I think that a couple of days ago I tabled the response. In fact, I even referred to you by name in my tabling of the response to bring it to your attention. So an answer was given on that issue.There are some questions that you did raise about questions which were put to your committee. I do not know whether this is the usual procedure but, anyway, we did pursue that for you. I have just been given some papers now. I think I shall be able to respond to you later this afternoon and provide you with the answers to that question. But I want to make it very clear that the question that you asked me in this chamber, as far as I am aware, I have responded to.13:56:005104Crowley, Sen RosemarySenator CROWLEYZF4SAALP00—I thank you for that reply, Minister. I guess that means that I shall have to keep an even closer eye on what is tabled in this place. As for when you referred to me by name, Minister, that is one of the things that usually sends a shudder through me, not a thrill of appreciation.WW4KEMPSenator Kemp—I don't how to address you now, Senator.10000CHAIRMANThe CHAIRMAN—Just address the chair, and then you will be out of all problems.ZF4Crowley, Sen RosemarySenator CROWLEY—Just as well, Senator Kemp. You just stay over there and answer the questions that we are putting to you now. The more important thing that I wanted a reply to is, I presume, on the bit of paper that you have there. I have been waiting and seeking information through the secretariat. They advised me, pretty recently, that they had not yet heard from Treasury. They were advised that answers were coming. If they are, and if you have got them there, then we will follow them up from here.I wanted to raise it because one of those questions was about this very issue of natural health services and acupuncture and so on. I have a couple of points I want to make. First of all, this runs quite counter to your principal thesis in this area—that there should be simplicity and removal of complications in this whole new tax package.We have said—and I have said this before, but I think it is a useful thing to say again now—that there are contradictions here. Some of these are in the provision of pharmaceuticals that might be called `natural health products' or pharmaceuticals that are provided over the counter which will now have a GST or a tax added to them when previously they had been exempt of this. Natural health remedies are now going to essentially be enjoying a GST and doubly disadvantaged compared to the advantages of within-the-loop pharmaceuticals. I certainly know that a number of providers of natural health remedies are going to be particularly enraged by—and, up to this point, are very concerned about—the treatment that you are providing or suggesting should be provided to their products.But there is a contradiction here. It is not too different from your understanding or your claim that health will be GST exempt, but only some of it and only sometimes. So if you were, for instance, looking for assistance through the health scheme for avoiding skin cancers from the sun, you would think that the government might, for consistency, want to provide to people with all the assistance it can, instead of which, you are about to slap a GST on sunscreens. You are being equally inconsistent in encouraging people to stop smoking while you are about to slap a GST on the lowest dose over-the-counter Nicorettes.Some of this, you may say, is not quite related to the amendments to hand, but they are in the same package of confusion, contradiction and complications. You are making things very complex here for people. There is no consistency, and there is no uniformity. So my final question actually is as follows. As I understand it, the minister has been given considerable powers to amend legislation down the track to include things not currently included and to delete things that might, indeed, be currently in. And, of course, we have no opportunity to see that legislation or to know what might be within the minister's purview, given that he or she has got an open-ended power. Can you tell us whether any of these complementary medicines in the future may, indeed, be included as GST exceptions under the minister's powers within the health area?14:00:005105Kemp, Sen RodSenator KEMPWW4VICLPAssistant Treasurer10—The minister does not have the power, but the list can be added to by regulation. That is the procedure that would occur if there were additions to be made to the list. Senator, I think you were quite right on one thing. This has strayed fairly wide off the amendments that are before the chamber. It is my view that we have had a lot of second reading speeches and debate from that side, so a lot of the general issues have been canvassed fairly widely. To the extent of keeping to the amendments before the chamber, that would be a help.But I am in a position now to table the second set of questions which were put to your committee. A range of issues was raised before your committee, as you will be aware. I would have to say that in some places the question was not clear, but we have done our best. It is quite extensive. Quite a bit of work has been done to pursue what you put to us. I would not want you to think we lacked any enthusiasm in doing that work. I table that document.14:01:005105Crowley, Sen RosemarySenator CROWLEYZF4SAALP00—I note in the tabling of that document that you made the comment that it was not quite clear what the questions were about.WW4KEMPSenator Kemp—Sometimes it was not.ZF4Crowley, Sen RosemarySenator CROWLEY—I just draw the chamber's attention to the fact that, firstly, you had access to the Hansard and, secondly, you had at least two of your parliamentary advisers present at every hearing. So I am a bit surprised that the questions were not clear, Minister. I do hope the answers will be sufficient to satisfy those people who put the questions and to whom we will now provide them.14:02:005105Kemp, Sen RodSenator KEMPWW4VICLPAssistant Treasurer10—Senator, could we resist putting the worst possible interpretation on people's motives and efforts? You have done that a couple of times in your contributions to the debate. You said I had not done something which I had done. We conscientiously pursued other matters which were not before this chamber. I have now provided you with a list.In qualification, I said that in some cases, on inspection of the Hansard and others, it was not altogether clear. Some people do not speak with the clarity with which you speak, Senator, so on occasions it was not clear what the question was. But, to the extent we could provide an answer, we did. Some may well require follow-ups, and we will do that. In order to keep the debate constructive—as you know, I am very slow to anger—I just put on the record that we did pursue what you asked us to do, and I think we pursued it in a conscientious fashion. You will be able to judge that when you read the answers.14:03:005106Bartlett, Sen AndrewSenator BARTLETTDT6QLDAD00—I have a couple of questions to ask of the minister, and they relate specifically to the section of the bill that my amendments relate to—that is, the exemption of other health services from the GST. Firstly, I will go to a point I raised in speaking to my amendments. Having lost track of all the questions that were put during various stages of the consideration of this, if they are covered in the list of things you have tabled just now, I am sure you will tell me. Has the government sought advice from the Australian Competition and Consumer Commission about whether it would contravene national competition policy to impose a GST on a service, again, such as acupuncture, when it is provided by a non-medically trained practitioner but not on exactly the same service when it is provided by a medically trained doctor?The second point is on a similar sort of issue—just to get both of my questions out of the way at once. This was something that did come up in the community affairs committee hearings, and a further response may have been provided amongst the mountains of documentation we have and I have not been diligent enough to see it. Again, I am sure it will be brought to my attention if that slipped past my attention.Amongst the list of health services that are exempt from the GST in the legislation, which I read out previously, is social work. When this was raised and considered at the community affairs committee hearing—and perhaps I am paraphrasing here—in terms of defining who is a social worker (because social work is exempt under this but counselling is not) the department's advice as to how it would be decided someone was a social worker was that, if they were a member of a recognised social work association such as the Australian Association of Social Workers or another national social work association whose name escapes me, they would be deemed to be social workers and, therefore, the service they provide would be GST free, but, if they were not, it would be subject to GST.I suppose I should declare an interest in this one because I do have a qualification in social work, but I am not a member of any professional association. Should at some future time I wish to practise in that area, I suppose this may affect me. The question was raised at that time about whether or not it contravenes industrial relations legislation by it being a form of, if you like, forced compulsory unionism by forcing social workers to join an association to be able to get a GST exemption. That is quite a legitimate question, whether or not it breaches legislation and whether or not it breaches a fairly basic principle, about which this government is quite prone to pronounce at great length, about the need not to force people to join associations or unions against their will.If that advice provided by the department at the community affairs committee hearing was correct, a person would have to join that association to gain a GST exemption. From memory, the criteria for joining those associations include having a recognised social work qualification, which, as I said before, I happen to have. It may be that they would not accept me because I am not a fit and proper person, or something like that—in which case, again, that may present a problem. I would also be interested in the government's response to that issue, which is a small issue in the scheme of things. Both in terms of consistency of application and in terms of those people who may be affected, I would be interested in its response to that specific question.14:07:005106Kemp, Sen RodSenator KEMPWW4VICLPAssistant Treasurer10—To answer the first specific question you raised: yes, I think you probably are a fit and proper person. You are worried that you may be rejected by your association on these grounds, and I am sure that that is not the case, Senator.You raised an issue about competition policy. I am always pleased to hear people coming out and supporting competition policy and national competition policy—it does not always happen from that side of the chamber—and that is noted and appreciated. To use the example you quoted, at present if acupuncture is provided by a GP it gets a Medicare rebate. My advice is that if it is provided by an acupuncturist there is no rebate. In relation to the problem that you felt may occur on the passage of this bill, currently there is an arrangement whereby a service provided by a registered practitioner is entitled to a Medicare rebate, but not when provided by someone who is not a registered practitioner. I do not think the national competition policy issues arise there. I will seek further information, but I would be surprised if that is the case. What we are doing is, of course, very similar—to carry your metaphor further—to what occurs at present.As far as national competition policy is concerned, it seems we will probably look at whether there are any undue restrictions on joining the association. I think that is more likely to be a focal point of national competition policy if that was an issue which arose. If there was administrative backing, perhaps, in which the legislation was reviewed you could see national competition policy issues being considered in that context. But I do not think in this context it is an argument that I would run.14:09:005107Bartlett, Sen AndrewSenator BARTLETTDT6QLDAD00—I want to clarify the question I asked about social work. I may not have pronounced it as clearly as possible or perhaps the minister was distracted by my flippancy, which I will try to avoid in future. Leaving aside my own personal future in this area, the question I was trying to get at was that, according to the advice provided to the Senate Community Affairs Legislation Committee, to enable people to supply social work services GST free they would need to be members of those associations. If they were not members of those associations, despite the fact they may be qualified social workers performing exactly the same service, they would not be GST free. The government's response to the principle, let alone any other legislative matters in an industrial relations sense, is to force people to join those associations to make their service GST free.14:11:005107Kemp, Sen RodSenator KEMPWW4VICLPAssistant Treasurer10—The government believes it is necessary to ensure standards and practices are maintained. There will be eligibility criteria and probably ongoing professional training to ensure that standards are maintained. I do not see why this is a problem.ZF4CROWLEYSenator Crowley—Explain it to us.WW4Kemp, Sen RodSenator KEMP—Senator Crowley shakes her head. I am always upset when I do not please Senator Crowley. This is not something which is specific to the legislation which is before us. I quoted a particular case where a service provided by a registered practitioner may be subject to a Medicare rebate, whereas the same service which is not provided by a registered practitioner, in this case a GP, may not be subject to a Medicare rebate. In principle, there is no significant difference, to my mind, about joining professional associations. I think the government is keen to make sure the standards are maintained, and membership of an association is one way of helping to ensure that that occurs.14:12:005107Bartlett, Sen AndrewSenator BARTLETTDT6QLDAD00—I realise this is one small part of the legislation. I do not want to harp on this just for fun, but it is something I want to get clear. I am using this as an example—maybe just because it is something I vaguely know something about it. It is different from what I usually talk about, perhaps. The Association of Social Workers would certainly help with professional development, but it would be akin to requiring doctors to join the AMA before they could be GST free or before they could claim Medicare, from what you are suggesting here. If that is what people have to do to be able to claim GST-free status, there are plenty of other avenues available to social workers for professional development. It is not an accreditation body. If it was an accreditation body I could understand it. It is simply a professional association similar, as I understand it, to groups such as the AMA. I have no idea of the level of membership of the association amongst all the social workers in the country.I am curious about the principle as well as the application of this. It seems to me to be a strange way to go. I could understand if you defined social workers as people who had a recognised degree in community development, social work or whatever and took that approach, but the approach which the department says is the approach to be taken—perhaps one way around this would be to confirm that that is still the approach which is going to be utilised—seems like a strange one to me. It may be that the department has either re-thought—or was mistaken at the time—simply defining a social worker as someone who has a recognised degree, because there is no professional accreditation body in the sense of being required to get admission to be able to practise or utilise the name or title of a social worker. There are many other sources available to social workers for ongoing professional development, including through ongoing future studies at university. So the principle seems to me to be very different from what the minister was explaining. Any further enlightenment he could provide on that would be appreciated because it does not make any sense to me. As I say, it seems equivalent to requiring doctors to join the AMA. If the minister can explain a bit more clearly to me why it is different from that, that would be helpful, or if the minister could clarify that perhaps there will be some other mechanism for assessing what social work services are other than this, that would obviously solve the problem.10000TEMPORARY CHAIRMANThe TEMPORARY CHAIRMAN (Senator Sherry)—The question is that Democrat amendments 1 and 8 on sheet 1348 be agreed to.14:19:00The committee divided. (The Chairman—Senator S. M. West)9Allison, L. Bartlett, A. J. J.Bourne, V. *Brown, B.Lees, M. H. Margetts, D.Murray, A. Stott Despoja, N.Woodley, J.50Abetz, E. Bishop, T. M.Boswell, R. L. D. Brownhill, D. G. C.Calvert, P. H. *Carr, K.Chapman, H. G. P. Cook, P. F. S.Coonan, H. Cooney, B.Crane, W. Crossin, P. M.Crowley, R. A. Denman, K. J.Eggleston, A. Ferguson, A. B.Ferris, J. Forshaw, M. G.Gibbs, B. Gibson, B. F.Heffernan, W. Herron, J.Hogg, J. Hutchins, S.Kemp, R. Knowles, S. C.Lightfoot, P. R. Lundy, K.Macdonald, S. MacGibbon, D. J.Mackay, S. McGauran, J. J. J.Minchin, N. H. Murphy, S. M.O'Brien, K. W. K. O'Chee, W. G.Parer, W. R. Patterson, K. C. L.Payne, M. A.Quirke, J. A.Reid, M. E. Schacht, C. C.Sherry, N. Synon, K. M.Tambling, G. E. J. Tierney, J.Troeth, J. Vanstone, A. E.Watson, J. O. W. West, S. M.Question so resolved in the negative.14:24:005108Margetts, Sen DeeSenator MARGETTSDX5WAG(WA)00—I seek to return to Greens (WA) amendment No. 1 on sheet 1392. I move:Clause 38-10, page 79 (after table item 1), insert:1A AcupunctureAs I mentioned before, this is related to the amendments which have just been defeated, but it is different. It is actually more specific. Honourable senators will remember that Senator Bartlett mentioned acupuncture amongst his list of complementary medicines he was hoping to encapsulate. This amendment adds acupuncture to the list of the 18 other health services specified in the legislation as being GST free. Thus, acupuncture will attract the same exemptions as health services such as chiropractic, occupational therapy, speech therapy and dietary services.Why do this? Firstly, acupuncture already meets the criteria for GST-free status. It is argued that acupuncture already meets the requirement for inclusion in table 38.10. The Vos committee noted that the health services included in 38.10 would generally be considered by the community to be mainstream rather than complementary or alternative, and they have been available as specialist services with specific qualifications for some time. That is from page 28 of the Vos report.Acupuncture is, of course, commonly used and widely accepted and can be considered a mainstream health service. Private health insurance administration council statistics reveal that acupuncture is a more frequently used health service than many others on the GST-free list, including speech therapy, dietary services and occupational therapy. Certainly acupuncture and traditional Chinese medicine are mainstream therapies in some of Australia's major Asian trading partners, including China, Japan, Singapore and Taiwan.The fact that Victoria is currently drafting legislation for the registration of acupuncturists is additional evidence to show its general acceptance. In addition, a large number of private health insurers already provide rebates for acupuncture services provided by qualified practitioners. The accreditation standards set by the Australian Acupuncture and Chinese Medicine Association have been the benchmark for providing recognition by all the major insurers, and about 80 per cent of practitioners belong to this peak professional body.Anticompetitive and discriminatory arrangements exist between acupuncture and traditional Chinese medicine services as provided by qualified professionals, and those provided by GST-free medical practitioners. Acupuncture is a recognised Medicare service when performed by a doctor but is not when provided by professional acupuncturists. Often medical practitioners may have completed only short courses in acupuncture, whereas a qualified acupuncturist will have undertaken a three- to four-year accredited degree or higher degree program.There are some 1,200 to 1,300 qualified acupuncture professionals presently practising who meet these requirements, as well as 1,200 general medical practitioners who regularly use acupuncture. The Australian Acupuncture and Chinese Medicine Association Ltd is the peak body regulating most qualified acupuncturists. The organisation accredits acupuncture practitioners, sets standards of ethics and practice, deals with complaints from the public, and disciplines practitioners who breach the rules and ethics.If this legislation goes through unamended in this area it will increase the financial disincentive for a person to go to a fully qualified acupuncturist. Not only do you not get a Medicare rebate, but also now the service will cost an extra 10 per cent. The inclusion of acupuncture does not require the government to extend the categories of goods or services which are to be exempted, nor does it require the government to change or add to the definition of a recognised professional. The government has apparently told the acupuncturists that cost is an issue. However, this seems to be an unfair argument considering that the costs do not seem to a factor when giving GST-free status to the other health services or, indeed, as Senator Cook would be quick to add, to high-rollers.It is also necessary to consider the fact that the cost savings from Medicare are likely to fall if acupuncture is given GST-free status. When provided by a GP, with possibly less than one month's training, it costs the government $18.45 and the quality of health care may be questionable, whereas if a patient visits an acupuncturist it costs the government nothing.Medical practitioners provide around 900,000 acupuncture services per year, costing around $17 million to Medicare. It might be that there is $3 million in lost revenue from GST if acupuncture were deemed GST free.I would like to read from a response that has been sent to us from the Australian Acupuncture and Chinese Medicine Association, which says:The acupuncturists and practitioners of traditional Chinese medicine, in addition to the . . . arguments—in relation to the cost for their inclusion in the GST list—of choice and savings to the health system, also argued that they currently met the criteria used by the Government in determining the GST free list. Their services are commonly used and wide accepted, mainstream . . . services. Private Health Insurance Administration Council statistics reveal that acupuncture is a more frequently used health service than many on the GST free list.. . . . . . . . .Acupuncture is a recognised Medicare service when provided by a doctor, but it is not when provided by a professional acupuncturist.And we have seen the evidence from Victoria. The reason for moving this amendment is to indicate that there is something we can do which is sensible and does not stretch the principles or lack of principles which the government has set for this debate. It does not require any major changes to the legislation except to suggest that we put something in which is sensible, commonly used and is considered by many people to be make important contribution. (Quorum formed)Here we have something which meets the criteria set by the Vos committee. It meets the needs of many people—a growing number of people. It is considered mainstream in a number of neighbouring countries and by many people in the Australian community as well. Under any guise of some definitions of complementary medicine, there is no reason not to include this as a GST-free treatment. It defies reason not to do so.This is a very reasonable amendment. If this chamber does not pass this amendment, we are going to have to come back at some time down the line and introduce some form of legislation to include acupuncture. It is on the verge of being included anyway. In this instance, we can see just how silly the government is in relation to digging in its heels on things which concern the community. I suppose in some ways this is a challenge to the opposition—and we have seen what has happened in respect of a number of these amendments. I urge support for this amendment because, quite frankly, it is just crazy to single out acupuncture and say that treatment by unqualified or semiqualified acupuncturists, provided they have a degree in medicine, will get a GST rebate but that treatment by qualified fully trained acupuncturists will not.14:35:005110Bartlett, Sen AndrewSenator BARTLETTDT6QLDAD00—The Democrats support the amendment moved by Senator Margetts. It is eminently sensible, for the reasons she has just outlined as well as for reasons I outlined in relation to the previous Democrat amendment. The amendment specifically inserts acupuncture as a health service among 18 other specified GST-free health services, some of which I read out previously, which are detailed in the legislation. This is another example of the way the parliamentary process and the committee process should work in considering government proposals adequately, not only to ensure that they are fair, equitable and do good things, but to ensure that they do what the government says they are going to do and meet the government's own criteria.The government went before the electorate and said that health would be GST free. We have already pointed out that a number of health services are not GST free. An attempt was made to raise this issue in the very brief and inadequate time frame prior to Christmas when the Vos inquiry was being discussed. As Senator Margetts has just pointed out, acupuncture clearly fits within the principles contained in the rationale for the detailing of services that are GST free. Bearing in mind all the arguments that have been made about complementary medicine—and I do not know whether the minister can come up with any justification; there certainly was not any in the committee hearings—this service should blatantly, obviously, justifiably and clearly sit in the group of GST-free health services.It is far more widely used than many of those that are GST free. It is clearly professionally recognised. It qualifies for rebates with private health insurers. It is a major complementary medicine service. It has a long-established history of use, both in Australia and overseas. Obviously, it has been far longer established overseas. (Quorum formed)I recognise that the arguments I am putting are so compelling that it needed to have extra people to come in and listen to them. Hopefully, they can convince their government colleagues to support Senator Margetts's amendment in this stage. Indeed, Senator Kemp assures me he is listening closely to the argu ments, so I will try and put them forward as compellingly as possible. In some ways, it does not need a compelling argument to be put, because it is such an obvious matter that needs to be addressed.The one and only question I would ask the minister on this amendment is for him to give us one possible logical reason why acupuncture should not be amongst the list of exempt health services. What is the reason that acupuncture does not fit the criteria? What is the principle that acupuncture fails to meet that all these other services do meet? That is the one question I would put to the government.Again, the plea I would make to the ALP in relation to these amendments is that the Democrats have said throughout the day that we will not be supporting this bill when it comes to a vote at the end of the proceedings but that we still believe it is our duty and our responsibility to improve it in whatever way we can, in case it is accepted by the government and by sufficient other senators at the end of the day and the Australian public get the legislation anyway.Whatever it is that the government may be discussing with other senators in this chamber about the GST legislation, they have not been negotiating with the Democrats for quite some time. Possibly they are discussing things with other senators at the moment. I do not know precisely what is being proposed, but I can be quite sure that, whatever the government is discussing at the moment with other senators, it does not include acupuncture. I suspect that it is probably not at the top of the agenda and probably nowhere in the middle or at the bottom of the agenda. I fear it will slip off the agenda entirely.Unless we in the Senate do what we can to make these changes to the legislation here on the floor of the chamber, I suspect that any other agreements that are reached outside this chamber will not include measures such as these, because they are not big enough ticket items; but they clearly will affect a lot of people. It is clearly counterproductive and it is clearly unfair.I would again urge the ALP to consider supporting even just this small amendment. I am quite sure that, if it did go through, it would not be the straw that broke the camel's back and led the government to throw the whole package out as unsustainable because acupuncture was GST free. It will not compromise the integrity of the whole tax system. It will not destroy it in the way that arguments have been made about other amendments. It is a simple one; it is a technical one; it is justifiable. I urge all senators to support it.14:42:005111Cook, Sen PeterSenator COOKRF4WAALP00—I do not have anything to say at all on this amendment, having put our position down previously with respect to the amendments en bloc from the Greens and from the Australian Democrats. I agree, though, with the intent of the amendment. Of course the GST should not apply in this case. However, as you would expect me to say, it should not apply in any case, not just in this one. As a consequence, we will not be supporting the amendment.14:42:005111Kemp, Sen RodSenator KEMPWW4VICLPAssistant Treasurer10—I have listened carefully to the arguments, as I promised to Senator Margetts and Senator Bartlett. I have to say that I am unpersuaded.DX5MARGETTSSenator Margetts—Tell us what the hole is in our acupuncture argument.WW4Kemp, Sen RodSenator KEMP—In its consideration of the GST-free treatment of the health sector, the government's main concern is to have as broadly based a tax as possible while recognising the need to ensure a level playing field for both private and public suppliers of health goods and services. The current list does not include services that most people would regard as complementary medicine. I think that point was sensibly canvassed in the Democrat amendment that we had before—and as I said, I listened carefully to it.The government has listed as GST free health services that would generally be considered by the community as mainstream rather than as complementary or—to use the term used by Senator Bartlett—alternative. The government recognises that there are many services, including recreational pursuits, that may have health benefits. But, at the end of the day the government does have to draw the line at a reasonable point. As you would be aware, a great deal of work and thought has gone into the drawing of the line. The Vos committee was very useful in helping to set the boundaries. The government believes the way the line has been drawn is appropriate. Therefore, after due consideration, we will not be supporting the amendments which Senator Margetts has moved.14:45:005112Margetts, Sen DeeSenator MARGETTSDX5WAG(WA)00—I actually thought that Senator George Campbell was going to make a contribution to the acupuncture debate, but I was obviously mistaken. Senator Campbell indicates that he has had acupuncture, as have I. I must declare an interest, in that I have benefited from acupuncture myself. I would like to thank Senator Kemp for bringing up the Vos argument again. It was the very argument that we were making: under the definitions and the criteria of the Vos committee—and the Vos committee was not perfect—acupuncture would actually fit. So thank you for reinforcing our argument. You still have not punctured our acupuncture argument, I am afraid. Therefore, because it is such a nit-picking approach that the government are taking—they will listen to business but will not listen to members of the community and will not listen to general health and equity issues—we are going to have to call for a division on this just to show how silly the positions are in relation to this.Question put:That the amendment (Senator Margetts's ) be agreed to.14:51:00The committee divided. (The Chairman—Senator S. M. West)9Allison, L. Bartlett, A. J. J.Bourne, V. *Brown, B.Lees, M. H. Margetts, D.Murray, A. Stott Despoja, N.Woodley, J.49Abetz, E. Bishop, T. M.Boswell, R. L. D. Brownhill, D. G. C.Calvert, P. H. Campbell, G.Chapman, H. G. P. Cook, P. F. S.Coonan, H. Cooney, B.Crane, W. Crossin, P. M.Crowley, R. A. Denman, K. J.Eggleston, A. Ferguson, A. B.Ferris, J. Forshaw, M. G.Gibbs, B. Gibson, B. F.Heffernan, W. Herron, J.Hogg, J. Hutchins, S.Kemp, R. Knowles, S. C.Lightfoot, P. R. Lundy, K.Macdonald, S. MacGibbon, D. J.Mackay, S. McGauran, J. J. J.Minchin, N. H. Murphy, S. M.O'Brien, K. W. K. *O'Chee, W. G.Parer, W. R. Patterson, K. C. L.Payne, M. A.Ray, R. F.Reid, M. E. Schacht, C. C.Sherry, N. Synon, K. M.Tierney, J. Troeth, J.Vanstone, A. E. Watson, J. O. W.West, S. M.Question so resolved in the negative.14:55:005112Kemp, Sen RodSenator KEMPWW4VICLPAssistant Treasurer10—by leave—I move:(25) Clause 38-25, page 81 (lines 7 to 11), omit subclause (1), substitute: (1) A supply of services is GST-free if: (a) it is a supply of services covered by Schedule 1 to the *Quality of Care Principles; and (b) it is provided through a residential care service (within the meaning of the Aged Care Act 1997 ); and (c) the supplier is an approved provider (within the meaning of that Act).[GST-free residential care](26) Clause 38-25, page 81 (line 26), after "include", insert ", and are only provided to people who require,".[GST-free residential care](27) Clause 38-25, page 81 (after line 29), at the end of the clause, add: (4) A supply of accommodation is GST-free if it is made to a person in the course of making a supply to that person that is GST-free under subsection (1), (2) or (3). (5) However, a supply of services that is covered by an extra services fee within the meaning of Division 35 of the Aged Care Act 1997 is only GST-free under this section to the extent that the services are covered by Schedule 1 to the *Quality of Care Principles.[GST-free residential care]These three amendments, on sheet FA210, clarify the scope of the government's proposals to make residential care GST free. Request 25 seeks to ensure that all services covered by schedule 1 of the quality of care principles delivered by facilities that are approved providers under the Aged Care Act 1997 will be GST free whether or not a subsidy is payable to the recipient of the service. Request 26 seeks to ensure that the services provided in privately funded residential care facilities are GST free only for residents requiring nursing services or daily living activities assistance. Request 27 will ensure that accommodation services provided at approved residential premises are GST free and that paying extra to receive extra services is GST free only if the services are covered by schedule 1 of the quality of care principles.14:56:005113Cook, Sen PeterSenator COOKRF4WAALP00—These are government amendments to its own legislation which give effect to a government undertaking. The principle is a reasonable principle if you support a GST. When we commenced the committee stage of this debate, the government had announced 128 amendments to its own legislation. Since then it has announced further amendments. By our count, there are now 143 amendments that the government has proposed to its own legislation. I note again that this is legislation the government put to the House of Representatives in December of last year which it claimed was perfect and which it demanded that the House attend to immediately. It denied the House proper opportunity to debate the legislation and introduced a guillotine to force the legislation through by Christmas.Now that we come to the Senate, there are now 143 amendments the government proposes to its own legislation. I wish the government would get its housekeeping right and be able to at least draft the legislation that it expects to put through the parliament. I wish it would treat the House of Representatives as a proper debating chamber and not simply as a rubber stamp for executive government. Having said that, at least this is a proper debating chamber, for the reason that the government does not have a majority here. If it did, clearly we too would be treated as a rubber stamp. Fortunately, the government does not have a majority, so we can examine these matters and debate them. I want to record those views for the record. To the principle of the amendments I have no objection.14:58:005113Murray, Sen AndrewSenator MURRAY3M6WAAD00—I just want to address a process remark to the minister. There has been a claim made that all parties arrived at this debate with their positions firmly tied and nothing was changed as a result of the Senate select committee and references committee process. But we have just been through a series of amendments—on housing, and on health in relation to alternative medicine and other things—which specifically emerged as a result of evidence to the committees. The government has seen fit to turn down Democrat and Greens amendments which arose from submissions and from evidence to those committees which indicated in what respects the bills were deficient. Here is the government doing the very same thing. The government drew up those bills. I do not know where we are now, Senator Cook, with the number of ANTS bills, but I am sure it is about 35, from what I have seen coming through the House of Representatives.RF4COOKSenator Cook—Yes.3M6Murray, Sen AndrewSenator MURRAY—Quite frankly, it is impossible for the very finest draftsperson and the very best government to get every word, clause, phrase and prospect right when you are designing 35 bills with such a wide range of reform.The point that Senator Cook is making is that the government went out and said how perfect this package was and that it could not be and should not be changed in any respect—and we always thought that was an absolutely ludicrous approach to take. We think the government is perfectly right and perfectly proper in actually finding mistakes and fixing them, and the amendments before us fall into that category. It is a wise and a sensible response to deficient drafting.Why should we on this side of the House take that rational, responsible and reasonable response to government considerations which are as a result of better reflection. Because do not forget: the government put this through in 20 hours in the House of Representatives. They forced it through and if they had had their way this would already be law and these amendments would never have appeared from the government side. That is what they wanted the Senate to do, and yet with up to 143 meaningful amendments from the government to address that problem.Quite frankly, what I find galling, from the point of view of the crossbenches, is that amendments put up which reflect considerations arising from the Senate committee process—which are constructive consequences to an understanding of problems, weaknesses and deficiencies in the legislation—are treated by a stonewalling government in the way they are and yet we on our side are taking a responsible, reflective and constructive response to the government amendments. If we wanted to get nasty with this stuff, we could take the view that we just oppose it all, and yet we do not do that.I just want to again make the point, Minister, which I made right at the very beginning of the debate: if you go through this entire package of bills with 143 amendments on your side and probably 130 or 140 amendments—I have not counted them—from the crossbenches and you do not accept one of those amendments, just look out, because we will have a long memory for unreasonableness. That is a clear warning to you, because I do not think it is humanly possible for every single one of our amendments to be unacceptable to the government. Of course I understand the food one; you have a profound difference in policy. Of course I understand many of the others, but a lot of our amendments too and those of the Greens (WA) are also technical and improve matters. That is probably a bad tempered response at the end of a long week, but I do want to contrast the way in which we deal with your amendments and the way in which you deal with ours.15:02:005114Bartlett, Sen AndrewSenator BARTLETTDT6QLDAD00—I do have a question of the minister in relation to these amendments, and perhaps also procedurally the Democrats have an amendment to government amendment 27. I know the government amendments were moved by leave together; I do not know if that generates a problem or not. If not, I would seek to move the Democrat amendment to the amendment. We have an amendment to omit a subclause in government amendment 27.10000TEMPORARY CHAIRMANThe TEMPORARY CHAIRMAN (Senator Crowley)—You are in order, Senator.DT6Bartlett, Sen AndrewSenator BARTLETT—I move Democrats' amendment on sheet 1389:Omit subclause 38-25(5)Dealing with these amendments separately, although later I might speak to the lot at once, the Democrats support government amendment 25. It removes the current requirements that a residential aged care subsidy must be payable for the service to be GST free. It would have meant that some residents of nursing homes would have had to pay a GST on accommodation services and would also have meant that residents who receive no subsidy for their accommodation costs, due to the means test, would have had to pay a GST on their nursing home fees. This is a positive amendment and, therefore, the Democrats are willing to be constructive and support it. As Senator Murray said, we wish the government would take a similar approach to our constructive amendments. We do not believe that older Australians should have to pay a GST on nursing home and residential accommodation fees, and we are pleased to see an amendment from the government that addresses some of those concerns.Government amendment 26, which again relates to GST-free residential care, deals with a clarification specifying the services to be provided to people who require the services set out in item 2.1 at part 2 of the schedule and in item 3.8 in part 3 of that schedule, which in plain English means nursing services or daily living activity services. It appears to me to narrow the definition slightly. The Democrats believe that people who require supported accommodation should not have to pay a GST for the services they require, and they should not have to pay for services they require as part of their supported accommodation needs. Many residents of nursing homes do not require nursing services but they do require some level of supported accommodation services. I want to clarify that with the government because it appears, on my reading of this amendment, that it would actually narrow the scope somewhat and require some people to pay a GST on their supported accommodation needs.In relation to government amendment 27 and the Democrat amendment we have moved to that, government amendment 27 contains two subclauses. Subclause (4), which we support, clarifies the application of the GST on residential aged care accommodation. Subclause (5) states that services under this section are GST free only to the extent the services are covered by schedule 1 to the quality of care principles and that any additional services would incur a GST.So we support subclause (4) which ensures the supply of accommodation is GST free but we oppose subclause (5) which, in our view, would restrict the GST-free status to those services covered under the quality of care principles and would result in some older Australians who already pay an extra service fee for the services they require having to pay an additional tax to continue to receive those services. That appears to the Democrats to be inequitable. I would appreciate a response from the minister on that question. It is an important amendment that the Democrats have moved—sufficiently important, I note, for the press gallery to be suddenly filled with people, so it must be an important matter. I hope that, with the enhanced audience, Minister, you might be able to address the couple of questions I have raised in relation to your amendments.15:07:005115Harradine, Sen BrianSenator HARRADINE6H4TASIND00—If I may speak to the amendments in a broad way, if the committee does not mind me doing that, and refer to the whole of the proposed new tax system—of course, in referring to that, one of necessity has a view about these particular amendments—we all agree that this new tax system proposed by the government is a major revolutionary reform and that, good or bad, we will have to live with it for decades to come. A huge effort has been expended by the government and by others in developing this new tax system proposal. The effort that has gone into it includes the physical, professional and mental costs for people, both from within the government and from outside.The executive government has put forward this proposal pursuant to what it considers to be a mandate given by the people at the October election. Much has been said about this question of mandate, and I am not going to enter into that argument at this point in time other than to say that the question of mandate, in my experience in the 24 years I have been here, has been brought into focus by some governments on the basis that the latest election has been for the House of Representatives, and that is the case when there are half-Senate elections. I do not know whether it is an appropriate call on the mandate when you have senators who have been elected but who are not yet in this chamber, but that is an aside. There have been other suggestions that people considered themselves to be informed but in fact were not fully informed, and I do not blame the government for that; it gave its best effort there. Furthermore, if you have a look at the votes in the last election, it may well be argued that the people did not fully support this measure.The Senate has its role, and that has been expressed readily over the years. The founders of the Constitution realised what they were doing by giving each house of parliament its proper functions. One of our functions in this bicameral system is one of review. We are the house of review and regularly exercise that review. This is being done here in this committee stage and was done during the second reading stage and by the Senate committees that investigated this matter over a considerable period of time. I had the honour to be part of the Senate Select Committee on a New Tax System as a participating member. That committee worked from December last year until it gave its report last month.Millions and millions of words have been spoken and written about this package. I am not going to repeat them because all of that has been said and done. There have been arguments for and against this package. Reasons have been advanced by the government for the necessity of this package, including one that the current revenue raising system is broke. There have been other suggestions by people on the other side of the fence who say, `If the revenue raising system is broke, what of the current and continuing budget surpluses?'There have been questions as to whether or not the package will deliver for export industries. Again, there have been other ways suggested as to how that could be achieved. There is the question of whether employment will be generated by this package—one very important matter for me, and of course for all of us. When one looks at the package one sees that there are winners and losers. One of the big losers is tourism and one of the winners is the manufacturing industry. There are plenty of the former in my home state of Tasmania and not much of the latter.Nevertheless, one needs to look at these matters on an overall basis, in the interests of the nation as a whole. I will not go into the principles I proposed in my second reading contribution, but I did mention one thing that I want to mention again here, and that is that the family is the fundamental group unit of our society and whatever is done should be family friendly. Unfortunately, the GST proposal regards the costs of raising children to be discretionary consumption. I believe it is very important that investment in children should be recognised as a social and economic necessity for the future wellbeing of this nation.The government has proposed to all and sundry that that is what it is doing with its family tax cuts. You can do that without a GST. That is evident by the government's ANTS package document whereby the government is proposing to pay for these tax cuts by running down the deficit, principally and with the business tax. That almost equals the amount of money that is needed for the tax cuts in the third year. So in essence it could be—and has been—argued on the other side that many of the tax cuts are required to pay back to taxpayers what they have already paid in bracket creep and the like.I have been told to keep in there and try to develop compensation for a better result. I have been asked to do that by some very close friends—not my wife, I might say. Sorry, she is a close friend—in fact she is my closest friend—and she and other friends have been urging me to be very careful before voting on this particular aspect of the tax package. With due respect to all of them, I have attempted to do that. I have followed this, and I have been backwards and forwards through all the technical details of the proposal. I am very grateful to those within the professions and within business who have given me technical and professional advice.The government has looked at the adequacy of compensation again and, to be fair to the government, it has sought to examine how best those compensation packages could be improved. For example, within the last day or so, there have been further suggestions by the government in respect of improving the family tax element of the package, better compensation for social security recipients, pensioners and the like, as well as for those who have no relationship with the government either through the taxation or social security systems. I thank the government for the work it has done on that and on a number of other areas as well. I believe the government may well reveal those. I do not feel that I am in a position to do so at this particular juncture. They were quite significant improvements to the package, to my way of thinking.Again, I will not go over what I said during the second reading debate. I enunciated the taxation principles that I believe should apply and against which the tax package should be tested—not only the classic ones of efficiency, equity and simplicity but the other matters that I raised in the second reading debate. I did say that taxation, as we all know, has a social as well as an economic dimension. The question that I have to answer is whether a significant part of the package meets the fundamental principles that I outlined. One of the fundamental principles is the capacity to pay. I think people all around this chamber will agree that the GST is inherently regressive. We all agree with that. The question is whether compensation is adequate. That is the question in my mind that is raised for the government.The question now in my mind is whether it is inherently regressive to such an extent that it should not be supported. The GST burdens the poor and those with the least capacity to pay. It discriminates against the poor and the pensioners who are living a hand-to-mouth existence and spending the bulk of their income on the necessities of life—food, clothing, rent, heating, power, bus fares and so on. Hard-pressed parents who are spending money on their families and raising children—the future taxpayers—are forced by this very tax into a means tested compensation package from the outlays side of the budget.We all know that when that is done, people look at the outlays later on, down the track—and I have been here for 24 years, and I have seen it before—and they say, `They do not need welfare.' They should not have to rely on welfare where that is avoidable, but in this case they are forced into it. And, as we know, those who are advantaged by this package are those who are the savers. Persons who cannot save are really faced with a 10 per cent increase in their income tax. There is no need for me to go into that. People realise that that is the situation. The pattern of expenditure for disabled people and for those who are chronically ill and elderly is more burdensome than for those without such disabilities. I have always been conscious of the fact that the true test of a civilised society is how it regards and treats its most vulnerable.But I do not claim here a monopoly on moral judgments in respect of this. I do not criticise the government, and I do not reflect upon the government or on any of its members. I just happen to believe that the inherently regressive nature of the GST does not achieve that test. The regressive nature of the goods and services tax is why compensation is invariably needed to secure its passage wherever it is introduced throughout the world. The government's genuine attempt to compensate and to lock in that compensation is something to be commended, but it cannot be guaranteed.But one thing can be guaranteed, and that is that the goods and services tax, once enshrined in legislation, will never be removed. Decisions we make now on this issue are not for the next three years; we are making decisions here that will affect generations. The question that I have to ask myself is whether I am going to be a party to imposing an impersonal, indiscriminate tax on my children, my grandchildren and their children for generations to come. I cannot.This has been a bitter decision for me to come to, because I respect the government and I respect the Prime Minister of Australia. One of the most difficult things that I had to do—and I wanted to face him man-to-man, but he is engaged on the work of government up in Brisbane—was to speak to him over the phone not so long ago, about an hour ago. I can only apologise to those in the government who have spent so much time—Minister Kemp, Senator Brian Gibson, Senator Alan Ferguson and all of those other people. I apologise, but I have to live with my own decisions. I know my name will be mud, whichever way it goes, but it has been mud before today, and it will be mud again later on.I do apologise, but I did my best to see whether or not in the end I could support the measure. I must say that the Prime Minister and the Treasurer knew my predisposition, because I made it perfectly clear. One of the major reasons that I kept on trying to find ways through in my own mind and in my own examination of the package was that I had been urged to do so by people whom I know and respect. Then again, I was urged not to do so by other people whom I know and respect. Madam Temporary Chair Crowley, I thank you and the committee for your courtesy in allowing me to make this statement.15:28:005117Kemp, Sen RodSenator KEMPWW4VICLPAssistant Treasurer10—Naturally, it will not surprise the chamber if I indicate that the government is disappointed with the decision that Senator Harradine has made at this stage. We believe that the package of reforms to Australia's tax system are fair measures and are good for the nation. We took our tax plans to the people—as Senator Harradine mentioned in his speech—and received, we believe, their support and, we believe, a mandate to implement our election promises.This week's budget, in our view, clearly demonstrated the government's commitment to delivering on its election promises, and that is precisely what we are seeking to do with this legislation now before the chamber. I indicate to the Senate that the government will continue to progress tax reform legislation in this chamber, and we will continue in our plans to get the Senate to pass the legislation and to implement our election promise, which, we say and we believe, is endorsed by the Australian people.I listened very carefully to the speech of Senator Harradine, and he would understand that there would be much in some of the comments that he made to which I believe very strong and forceful counterarguments can be made. This is not the time to do that in detail. I do stress that, from the government's perspective, this is a fair package. It is a package which we exposed to the people before the election, which we debated at length through the election and which has been subject to the most rigorous scrutiny, I suspect, of any legislation ever to appear before the parliament.Senator Harradine, as he mentioned, had the courtesy to inform the Prime Minister of his decision today, and it is my understanding that the Prime Minister will be making a statement on that in the near future, and undoubtedly dealing with press questions and other matters which will be raised. But, Senator Harradine, we are sorry to hear what you have said here late this afternoon, but we do appreciate the courtesy with which you took the decision to the Prime Minister.As I said, from our perspective, we will continue to progress the bills in this parliament. We will continue negotiations in good faith to implement a new tax system, which we believe is fundamentally in the national interest. If we did not believe it was fair, if we have did not believe it was in the national interest, if we did not believe it was good for our children, if we did not believe that this would set up Australia for the 21st century, we would not have put this before the parliament. So the debate has a way to go. As I said, the Prime Minister will be making a statement shortly. 15:31:005118Cook, Sen PeterSenator COOKRF4WAALP00—At about 3.30 on this day, 14 May, this Senate witnessed what I regard as a statement of great moral courage, and I commend Senator Harradine for it. I know that he has agonised long and hard. I have sat with him during the four months of the Senate inquiry. He attended most of those hearings and took part in nearly all of the examination of all the witnesses.It was an arduous task and, for someone exercising a balance in this, it was a very difficult and complex task that imposed great strain and great pressure. Many of us, if we were placed in that position, would have wilted under the weight of responsibility. I have to acknowledge, and would have said this had Senator Harradine not announced his position, as he has today, that Senator Harradine conducted himself with profound dignity and with great consideration as to the issues.I came to this debate with a view which, of course, as the debate has unfolded, has been confirmed. We started on the Prime Minister's great tax adventure in August 1997. It has been a long and winding road to this day—14 May. The ANTS package came out in August 1998 and we saw for the first time the published detail in that degree of comprehension. We had an election in October at which 52 per cent of the population on a two-party preferred outcome, in aggregate totals, voted Labor. If that was a referendum on a GST, a majority was not found in sufficient states or in the Commonwealth overall to have passed it. We lost the election because our votes were not distributed strategically in the key seats, but the issue for that election was the GST, and we always believe that the people of Australia stood in opposition to a GST.It was not the first occasion they had an opportunity to judge. They did so in 1985 at the Tax Summit through organisations representing the broader community. They did it in 1993 at the election that year. I believe that the Senate inquiry that followed the election for the first time served the community of Australia well in this debate. It served it well because it enabled the fine print to be turned to, the detail to be examined and conclusions to be reached on judgments that we were told before the election were good for us.The conclusion was the unexceptional fact now in retrospect: that a regressive tax requires compensation, that you cannot be sure that a regressive tax will not rise. International experience is that goods and services and consumption taxes always do, and the mechanism to prevent it was never going to do so. A regressive tax requires compensation to protect those at the lower income areas. The question was always: was the compensation adequate? We felt it never was. A turning point in this debate was in the dying minutes of the Senate inquiry when Professors Warren and Harding, giving evidence to the Senate in the presence of the Department of the Treasury, confirmed that, in effect, Treasury had said pensions would erode over a short time and the compensation for pensioners, for that class of Australians, would not exist. That was a turning point in an examination of what was fair in this package.We always thought that the compensation, even if it was adequate and the pensions did not erode, would not remain eternally true, although the tax would always be there, because succeeding governments would change the compensation mix and, according to the needs of the time—that great expression as a let out—the compensation would fall away. So, when you embarked on this endeavour, we believe that the compensation would never be good enough and it would never be sustained. We believe that the tax cuts were tax cuts that gave with one hand and took with another.Today in the debate in this chamber, before the Democrats amendment on food was defeated, Senator Meg Lees was asked whether she would vote against the package if that amendment was lost and she said yes. Now I understand from the statement of Senator Harradine that he too will vote against the package. I do not know what the next step in this procedure is, but no doubt we will turn to the detail and laboriously plod on. But what has been said in this chamber marks the end of this package. It was a decision made not by me; it was a decision made by a majority of this chamber.I commend Senator Harradine in the circumstances, given the pressure placed on him and the difficult situation he has been placed in. He has been true to his moral code, the code he announced to us in his speech at the second reading stage but which we have always known existed, in making the announcement he has today.10000TEMPORARY CHAIRMANThe TEMPORARY CHAIRMAN (Senator Crowley)—I remind everybody that, if you are really looking to complete your comments by a quarter to 4, you take that into account.15:37:005119Murray, Sen AndrewSenator MURRAY3M6WAAD00—I will speak very briefly. In circumstances such as these we are reminded of the mystery and magnificence of human nature because we have just witnessed an individual senator going through the agonies of reconciling a very complex and difficult issue, that is, how you reconcile morality with policy, how you try and conceive the future as a consequence of your personal actions.Senator Harradine is sometimes the butt of cartoons and of media commentary which, quite frankly, is unpleasantly superficial in failing to understand the real responsibility which falls upon a person who happens, through no action of his own, to end up with the balance of power. Whatever our views on this particular package and whatever perspective we have, I just want to record my personal appreciation of the dignity and the manner in which Senator Harradine has dealt with this issue.The Democrats are going to go away and have a long think about how we should progress, but my view is that the government no longer have the numbers and it might not be very educative to continue ploughing on through what we have before us. It may be an exercise in futility; however, I will leave that to another day. But I do want to record on behalf of the Democrats our recognition of the difficulties you have faced, Senator Harradine, and how well you have coped with them. I acknowledge you, as a senator, accordingly.15:40:005120Boswell, Sen RonaldSenator BOSWELLYE4QLDNP10—The Constitution has placed Senator Harradine in a very difficult position, and I think everyone in the Senate would recognise that. He did not write the Constitution, he has to live with it and I do not question his motives for one minute. He is a personal friend of mine, and I know the strain he has been going through. But I would be less than honest with my own constituency if I did not express disappointment on behalf of the people in rural Australia and in small business.There are 25,000 farmers required to feed and clothe Australia. There are about 125,000 that depend on exports to sustain themselves and to gain a living. There was $4½ billion that would have been removed from all exports from Australia. It would have made them more competitive. It would have allowed them to compete and gain some monetary benefits. I point out to the Senate that, unfortunately, the lowest incomes at the moment, because of low commodity prices and low wool prices, are in rural Australia. They will miss out on $4.5 billion. They will miss out on a huge reduction in diesel fuel which would have made their living expenses and their transport of food from the cities into the bush a lot cheaper. They would have got 7c a litre on petrol when it was used for their business, which would have made them a lot more competitive. Small businesses complain at the moment about the $30,000 tax anomaly in the retail area that disadvantages them and which would have been washed out by the GST.I know Senator Harradine has balanced all these things in his mind. To my constituents, this is going to be a pretty hard blow to wear. I think if something is right—and I believe we are right on this—one thing down here that I have learnt is: do not be afraid of moving forward. Sometimes you have got to. It is comfortable to sit where you are, and no-one is more conservative than the people in the National Party. They get comfortable and sometimes they do not want to move forward. But down here we have got to lean forward. This, to my constituents—and, I think, to people all over Australia—was a forward move and they will be disappointed. But when I say that, Senator Harradine, I in no way question your motives. I think that we should proceed with the debate and then it will be up to the Prime Minister where we go from there.15:43:005120Brown, Sen BobSenator BROWNQD4TASAG00—I want to add a word of congratulations to Senator Harradine. I was wrong about the outcome that we have here today, but that is not the important thing, nor is Senator Harradine's decision not to support this package. I think the important thing is the deliberation that he has undertaken in getting to this decision. It is an exemplar of the role of the Senate, which is, amongst other things, to review government legislation on behalf of the people. It is just a pity that the diligence, research and effort that Senator Harradine, along with other people in the Senate, has put into investigating the ramifications of the GST for the people of Australia are not emulated in the House of Representatives.I also want to say that a very heavy responsibility now transfers to the Democrats. They are going to be the party of the GST. They have taken to themselves the responsibility for the GST being introduced to this country. I think that it is a responsibility which they are going to have to bear with a lot of criticism and are going to have to think a lot about. The Democrats now become the GST arbiters. They are going to take the role of ushering the GST into the taxation system of this country with all the ramifications it has on the people of Australia. I think they are wrong in that. I think they have been manifestly wrong since the election campaign in that role. But we will be here to enter that debate on another day.Progress reported.Adjournment512110000PRESIDENTThe PRESIDENT—Order! I propose the question:That the Senate do now adjourn.512115:45:005121Payne, Sen MariseSenator PAYNEM56NSWLP10—I want to pay a very brief tribute to a long serving, committed Liberal and former Premier of New South Wales, Sir Eric Willis, who died earlier this week. I make my brief comments personally as well as politically because my family had known Sir Eric since 1949. He died, aged 77, after some 28 years in the New South Wales parliament and a distinguished career outside politics. He was from a great Liberal family. His brother Max Willis was a longstanding member and former president of the Legislative Council of New South Wales.Sir Eric was from Murwillumbah in northern New South Wales and was educated there and at the University of Sydney. He served in the AIF in New Guinea and the Philippines in the Second World War. In 1949 he unsuccessfully stood for the then federal seat of Lang in New South Wales, and afterwards contested and won the state seat of Earlwood in 1950. It was there that my family became connected with Sir Eric. My father, also a World War II veteran who served in New Guinea, campaigned with him in Lang in 1949 and even in very recent times Sir Eric has continued to remind me of that connection. When I joined the Liberal Party I joined a branch in the then state seat of Earlwood, which Sir Eric had represented for 28 years, and my family's home in Sydney was only two streets away from the Willis home in the suburb of Bardwell Park.Sir Eric was deputy leader of the New South Wales parliamentary Liberal Party for some 15 years and Leader of the House for 10 years. It is said that he earned the somewhat forbidding nickname of `Stainless Steel' in that capacity of Leader of the House, although I do understand there are other political stories as to how that may have come about.During his long parliamentary career he held a broad range of portfolio responsibilities including tourism, sport, labour and industry, education, treasury and Chief Secretary. When he was elected Premier, it was a post he held for only four months because he called an early election which saw the ascension of the first Wran government—and the rest, as they say, was history. When he was elected the Sydney Morning Herald recognised a man of great experience and great political expertise and said:He is well known for his steadiness and acuity . . . he is a seasoned, highly professional politician.After that defeat he served as opposition leader for, I think, two years and retired from politics in 1978.I suspect the things one chooses to recall at the end of a political career are always curious. But Sir Eric, when asked, said:If I had to pick one achievement of my period as Premier that I might be remembered for in the public mind, it would be the introduction of daylight saving.I guess it was no surprise to him that the editors of various major metropolitan newspapers continue to this day to receive letters complaining about the removal or otherwise of daylight saving.He had a very fulfilling post-political career—which I think is the test of whether someone can actually make that transition. Initially after his retirement he became executive director of the Arthritis Foundation. He was also chairman of the first Australian Constitutional Convention—as it was described by Who's Who—held in Sydney in 1973. I regret that I never had the opportunity to discuss that with him.He was elected to the New South Wales Legislative Assembly 10 times and when he was first elected he was the youngest member of the Assembly. He will be remembered as a great friend and member of the Liberal Party in New South Wales, and even in recent years he was still participating in redistribution deliberations in particular. Only last week his son, Greg Willis, represented Sir Eric at a function in my office in Parramatta because his father was away on holidays.I know that I reflect the views of many members of the New South Wales division and friends from the New South Wales community, in remembering his contribution to the Liberal Party in New South Wales and also in noting that our sympathies are with his family. He served his party, his parliament and his state with enormous distinction. I would like to echo the words of New South Wales Liberal leader, the Hon. Kerry Chikarovski, in saying that the party has `lost a great figure in our political history'.15:50:005122Senate adjourned at 3.50 p.m.Documents51225122The following documents were tabled by the Clerk:Aged Care Act—Allocation Amendment Principles 1999 (No. 2).Extra Service Amendment Principles 1999 (No. 2).Residential Care Grant Amendment Principles 1999 (No. 2).Answers to Questions on Notice5123The following answers to questions were circulated:5123(Question No. 1245)12455123Bourne, Sen VickiSenator BourneTW4NSWAD00 asked the Minister representing the Minister for Foreign Affairs, upon notice, on 21 July 1998:(1) What sanctions has Australia applied to India and Pakistan as a consequence of their ill-advised series of nuclear tests.(2) How many tests including sub-critical tests have been carried out by India and Pakistan, respectively.(3) (a) What programs of non-explosive tests, simulations and weapons design oriented research does the department believe are carried out by each nation; and (b) what facilities exists for the conduct of such activities.(4) How many tests including sub-critical tests have been carried out by the following nations: (a) the United States of America (US); (b) the Union of Soviet Socialist Republics and Russia; (c) France; (d) China; and (e) the United Kingdom (UK)(5) What sanctions has Australia ever applied in respect of nuclear tests carried out by each of these nations.(6) What programs of sub-critical, non-explosive, testing and stockpile maintenance are now carried out by: (a) the US: (i) prior to, and (ii) after, the disbandment of the Division des Applications Militaires on 23 June 1998; (b) Russia: (i) prior to and (ii) after, the disbandment of the Division des Applications Militaires; (c) France: (i) prior to, and (ii) after, the disbandment of the Division des Applications Militaires; (d) China; and (e) the UK.(7) What facilities exist in each of these countries, of which could be used wholly or partially for the design of nuclear weapons without resort to explosive nuclear tests.(8) What detail is known of the design, research programs and budgets for facilities such as DAHRT and NIF in the US and BARP in France.(9) What role is actually played by each of these facilities in stockpile stewardship programs in the US and in their equivalents in France.(10) What equivalents to these facilities and to the stockpile stewardship programs of the US exist to the Minister's knowledge in China, Russia and the UK.(11) What would be Australians reaction to a further program of sub-critical tests by each of: (a) the US; (b) Russia; (c) China; (d) India; and (e) Pakistan.(12) Is the Minister aware of the reluctance of some within the US Congress to ratify the Comprehensive Test Ban Treaty (CTBT).(13) What steps are being taken to ensure positively that the US does in fact ratify the CTBT along with Russia and China in light of the prompt UK and French ratification of that treaty.(14) Is the Minister aware of the arguments of some members of the US Congress that the US should not only refuse to ratify the CTBT but that it should actually recommence testing.(15) What is the attitude of the Minister and department towards such arguments that the CTBT should not be signed and that tests should be recommended by the US.(16) What proactive steps are being taken to ensure that this never occurs.(17) What steps can be taken in respect of: (a) a further Pakistani or Indian test; (b) an Israeli test; (c) an Iraqi or North Korean test; (d) a resumption of Chinese testing; (e) a resumption of Russian testing; and (f) a resumption of US testing.(18) Will Australia recall its ambassador for consultations and apply sanctions in response to testing by any of these nations.5123Hill, Sen RobertSenator HillBH4SALPEnvironment and Heritage10—The Minister for Foreign Affairs has provided the following answer to the honourable senator's question:(1),(5),(17),(18) Sanctions for nuclear testing: The Government's response to the tests by India and Pakistan was firm—including bilateral measures involving suspension of Ministerial and Senior Officials' visits, defence relations and non-humanitarian aid. The Government's response to the tests has registered strongly with both India and Pakistan. The Government has taken a prominent role in regional and multilateral forums in addressing issues raised by these tests, including at the ARF (Manila, late July), in the Task Group of Senior Officials (London, July and October), and at UNGA 53. The Government's primary objective in responding to the nuclear tests remains to work for a concerted international resolve to deny India and Pakistan any special status consequent on the tests, and to continue to exert pressure on the two States to move towards compliance with the ten demands set out in Security Council Resolution 1172 of 6 June 1998. India and Pakistan have made some progress towards fulfilling these benchmarks. They have reopened a bilateral dialogue with some limited progress reached in areas of trade and people to people exchanges. Both countries withdrew their opposition to commencing negotiations on a Fissile Material Cut-Off Treaty. They have both announced a caveated intention to adhere to the Comprehensive Nuclear Test Ban Treaty. They have also signalled a willingness to formalise through national export controls their pledges not to export sensitive nuclear technology. These are welcome gestures and we look forward to their early implementation.These moves have led a number of countries, including the United States and Japan, to revisit some of their measures imposed against India and Pakistan in the wake of the tests. This is intended to encourage India and Pakistan to continue to move towards implementing the requirements of UNSCR 1172. Against this background, the Government reviewed the measures it adopted in response to the tests, and decided that it would be appropriate to relax our suspension of ministerial and senior official visits. The Government considers that the pursuit of bilateral dialogues with India and Pakistan are an integral part of encouraging the two countries to make progress towards meeting UNSCR 1172. The resumption of a high-level bilateral dialogue will allow more regular discussions about our concerns arising from the nuclear tests and the tensions existing between India and Pakistan and the implications for Australia and the region of the nuclearisation of South Asia, as well as on the range of economic, political, security and other matters in which we have a mutual interest with Pakistan and India. The Government's suspension on the provision of non humanitarian aid to both countries remains, as well as the suspension on bilateral defence relations.The Government's response to nuclear tests has been—and will continue to be—appropriate and proportionate and seeks to underline the clear message from Australia and the overwhelming majority of the international community as regards the need to demonstrate a genuine commitment to the international nuclear non-proliferation and disarmament regime. The issue of what actions Australia may take in response to future tests would have to be examined in the light of circumstances at the time and on a case by case basis. (2) Successive Australian Governments have consistently opposed and, as appropriate, protested at nuclear tests carried out by any state. India conducted one nuclear explosion in 1974. The Government of India announced it had detonated three nuclear explosions on 11 May 1998, while the Government of Pakistan announced it had detonated five nuclear explosions on 28 May. For these two cases only one seismic signal each was recorded on Australian seismic stations indicating that all explosions were detonated simultaneously or that only one was large enough to be recorded.The Indian Government further announced the conduct of two sub-kilotonne explosions on 13 May 1998. Despite an intensive search, including of the seismograph records of the Pakistan seismic station at Nilore, no signals from these events have been found. The Government of Pakistan announced that it conducted one nuclear explosion on 30 May, for which a seismic signal was detected.(3) (a) and (b) the Government is unable to verify the detail of what, if any, programs of non-explosive experiments, simulations and weapons design orientated research is being conducted by the Governments of India and Pakistan. Nonetheless, by conducting nuclear explosions, both India and Pakistan have demonstrated the capacity to develop nuclear explosive devices, and it is clear that appropriate facilities have been developed for this purpose by both countries. It is not possible to verify the degree of nuclear weaponisation by India and Pakistan.(4) The number of nuclear weapons test explosions conducted by the five nuclear weapon states according to the Arms Control Association and published in its journal `Arms Control Today': (a) USA—1030; (b) USSR/Russia—715; (c) France—210; (d) China—45; (e) UK—45. The ACA is a reputable non-profit membership organisation, based in the United States, dedicated to promoting public understanding and support for effective arms control policies.Since the opening for signature of the Comprehensive Nuclear Test-Ban Treaty (CTBT), the United States of America has conducted sub-critical experiments at the Nevada nuclear test site, on the following dates: 2 July and 15 September 1997, 25 March, 26 September and 9 December 1998. There were some media reports that Russia may have carried out a sub-critical experiment at its nuclear test site at Novaya Zemlya in August 1997. Russia made a public announcement of a sub-critical experiment conducted at Novaya Zemlya in December 1998. France, China or the United Kingdom have not announced details of any sub-critical experiments, if any, and such programs cannot be independently verified. Sub-critical experiments are not prohibited by the CTBT. (6) to (10) (Research & Design Facilities) As a non-nuclear weapon state, Australia is not privy to the requirements of nuclear weapons development and maintenance.All the five nuclear weapon states have nuclear weapons maintenance programs, all of which vary according to the different nature of their weapons:United States: The United States Department of Energy (DOE) has responsibility for the U.S. "Stockpile Stewardship and Management Program" . Research Laboratories (US): National Ignition Facility (NIF): (Laboratory facility housing laser equipment designed to facilitate experiments into nuclear weapons physics without underground testing); Los Alamos National Laboratory (stockpile stewardship and materials management); Lawrence Livermore National Laboratory (stockpile stewardship and materials management); Sandia National Laboratories (design of non-nuclear components of nuclear weapons); Rocky Flats Plant (environmental technology site / site cleanup); Pantex Plant (weapons assembly/disassembly), SOURCE: Nuclear Weapons Databook (NWD); DOE Internet Homepage.France: In reference to "BARP" (Question 8) , there is a French facility at Le Barp, 30 km south of Bordeaux (The Centre d'Etudes Scientifiques et Techniques d'Aquitaine—CESTA) a research facility under the French Atomic Energy Agency. "CESTA's principal mission is to militarise nuclear warheads in ways comparable to what is being done by the U.S. Defense Nuclear Agency and Sandia National Laboratories.": SOURCE: NWD. Other research related to maintenance of the nuclear stockpile in France is conducted by the Centre d'Etudes du Ripault under the French Atomic Energy Agency. SOURCE: NWDRussia: Minatom, Chelyabinsk-70; SOURCE: US DOE, September 1995;China: Chinese Academy of Engineering Physics; SOURCE: NWD;UK: Atomic Weapons Establishment (AWE), Aldermaston.(11) The five Nuclear Weapons States (NWS—United States, Russia, China, United Kingdom and France) signed the CTBT on 24 September 1996. They are committed to never again conduct a nuclear test explosion. Sub-critical nuclear experiments conducted by the NWS are not inconsistent with their obligations under the CTBT, and are intended to ensure that existing nuclear stockpiles are maintained in a safe and reliable condition. The Government accepts that, as the Nuclear Weapon States recognised by the NPT work towards the ultimate elimination of nuclear weapons as required by that Treaty, it is in everyone's interest that their arsenals are safely maintained The Government would not intend to comment on activities conducted by any of the which were consistent with their obligations under the NPT and the CTBT. In contrast, the conduct of any sub-critical nuclear experiments by India and/or Pakistan would be designed to develop new nuclear weapons capability. The Government would regard such experiments conducted by India and/or Pakistan, as acting outside the norm of the NPT which limits nuclear weapons possession—and therefore maintenance and development activities—to the five NWS. Through their signature of the NPT, the NWS which existed in 1968 have committed themselves towards working towards eventual nuclear disarmament. India and Pakistan have not.(12) Yes.(13) The US Administration has made it clear that it places important priority on US ratification of the CTBT. President Clinton has stated this objective repeatedly, including in the State of the Union Address, and in the wake of Indian and Pakistani nuclear testing, where the President said in May this year that "Now it's all the more important that the Senate act quickly, this year, so that we can increase the pressure on, and isolation of, other nations that may be considering their own nuclear test explosions." (more proactive, JSCOT recommendation)(14) Yes, although I would note that the arguments in favour of recommencement of nuclear testing by the US are very much the views of the minority.(15) The US was the first country to sign the CTBT, on 24 September 1996. President Clinton has sent the CTBT to the Senate for ratification as soon as possible. It is the strong conviction of the Government that ratification of the CTBT would be the single most important step the US could make in support of the global norm against nuclear weapons testing, and would serve as a strong incentive for other countries—nuclear weapon states and non-nuclear weapon states—to likewise ratify the Treaty, and bring it closer to entry into force.(16) The Government will continue to make regular representations to the US, China and Russia—and to all other countries which have not yet signed or ratified the CTBT—urging them to do so as soon as possible. The US Government has on no occasion given any indication of an intention of going back on its commitment indicated by its signature of the CTBT permanently to cease nuclear weapon explosive testing. All nuclear weapon states have reiterated their commitment to the CTBT in the wake of Indian and Pakistani nuclear testing—statements which we welcome as evidence of their intention to stand by their signatures of the Treaty, and in the case of the UK and France, their absolute legal commitment as demonstrated by their ratification on 6 April.