EBFI1ARGO: -12.' 45 P. ti i
W9. A. PRESS CLUB LUNCEON 1st December 1977
There are just nine days to go to polling day, and ais each day
passos the vast differences between tim Government parties and
the opposition become more obvious.
Let me tell you what I see those differences to be. Fii~ st, the
Government has a coherent and proven strategy to beat inflation.
By a combination of restraint in Government spending, firm
control over the money supply, a responsilble deficit and encouraging
wage restraint we have succeeded in gettLing inflation down.
The three quarterly Consumer Price Index figures published so
far this year show that inflation is now running at about 9%.
And I expect that during the next 12 months it will be reduced
to between 6-8%.
Labor by contrast has no anti-inflationary policy. Their policies
of increasing the money supply through big government spending,
big deficits and high wage increases are patently all inflationary.
All Labor can claim to offer in the fight against inflation is
abolition of payroll tax which, even if it did result in some
reduction in prices which is highly doubtful to put it mildly
could only have a once-off effect on the Consumer Price Index.
E . ven that would be rapidly outhalanced by the inflationary nature
of their fiscal, monetary, and wages policies.
-he second difference between the parties is on taxation. vie
are firmly committed to low taxation, and we have taken major
steps in this area. Tax indexation is one of the most fundamental
steps that could have been tab-en to protect the taxpayer, and
discipline Government expenditure.
our reforms of the tax scale are just and equitable. They simplify
the personal tax system in such a way as to benefit everyone, to
reward initiative and enterprise for everyone, to encourage harder
work and higher productivity for everyone.
of taxpayers will be on the same standard marginal rate of
tax 32 cents in the dollar. This provides incentive to everyone
to increase their earnings, as the vast majority of people can
earn more without falling into a higher tax bracket. In other
words, it is now worth working overtime again. / 2
I should also say that while the reformns estLablish 32% as the
basic rate of taxation paid by the vast majority of taxpayers,
the principle of progressive taxation is maintained. Because
the first $ 3,750 of everyone's income is tax free, taxpayers
on higher income-s will pay higher proportions of their total
income in tax than taxpayers on lower incomes. For example,
the taxpayer without dependanits earning $ 4,000 pays 8% U of his
income in tax. on $ 10,000 he pays 20%, on $ 20,000 he pays
28.8% and on $ 50,000 44.2%. The tax reform accords with the
view of most taxation experts. It is overwhelmingly supported
by the reports of the Committees of Enquiry Labor established
when they were in Government. The Asprey Committee, the
most comprehensive review of Australia's tax system in
years, concluded the Australian tax system relies too heavily
on personal income tax.
The Mathews Committee concluded that high marginal tax rates
encouraged tax avoidance and evasion. The Jackson Committee
warned that: " We have a general impression that the reward
differentials after tax are decreasing and may no longer be
sufficient to encourage individual enterprise and effort in
industry." Our tax cuts, as Mr. Hurford has belatefdly conceded, are a
significant social reform. 225,000 additional low income
earners, people with taxable incomes under $ 3,750 a year, will
be exempted altogether from paying tax.
But just as importantly tax cuts are an integral part of our
strategy to create more jobs for those who want work. The
February tax cuts will provide a responsibl. e and moderate
stimulus, injecting $ 26.7 million per week into the economy.
Because this injection takes place when inflation is falling,
it will. have a positive impact on jobs, by lifting consumer
spending. This will mean factories getting more orders,
investment increasing further, and companies taking on more
employees. Unlike wage rises of a comparable amount, which Mr. Hawke
says he would prefer, an increase in disposable income through
tax cuts is not inflationary provided it is funded properly
through a responsible deficit made possible by responsible
expenditure restraint. It does not cost employers an extra
cent. It does not cause prices to rise.
The tax cuts will, I believe, reduce the pressure for wage
increases, and thereby contribute to reduce inflation and
unemployment. Labor, by contrast, is living up to tradition as the high tax
party. They would recall Parliament early to repeal the
February tax cuts which will benefit so many. And it's clear
that their commitment to tax indexation has been swept aside.
And all for what? For a payroll tax scheme which ma ) or
employers have said will not work; which Mr. Dunstan s
South Australian experience has shown will not work; and which
Bob Hawke is busily sabotaging ais fast as he can go.
The parties differ fundamentally on the need for growth and
development. We have given every encouragement to investment
in all our industries.
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Because of our tax concessions, our fair but flexible foreign
investment guidelines, our decisions on crude oil pricing and
uranium dcvclopment, and our success in reducing inflation,
exploration and development are proceeding at a pace.
Oil exploration is well uip, particul~ rly in this state. In the
September quarter, private capital spending rose strongly by
6.6% seasonally adjusted. And the A. B. S. survey of expected
capital spending for the current six month period tips a growth
of 14% a most encouraging sign.
On Monday, I was able to provide details of $ 6,000 million of
committed investment already under way or set to go. And there*
is more than that again tied up in other investment projects
which are likely to proceed though not yet formally committed,
such as the great North West Shelf development.
Labor's policies would effectively stop this trend to increased
investment in its tracks. All the vital. tax concessions to
business and the mining industry would be removed. Draconian
and quite unrealistic foreign investment rules would be imposed.
According to Labor's official platform, a capital gains tax would
be introduced; and, of course, Labor's commitment to vast
increases in Government expenditure would start the greatest
investment-killer of them all inflation racing away again.
Perhaps the most obvious difference between Government and
Opposition in the past fortnight has been the cohesion of the
coalition team and the bizarre series of contradictions and
confusion in the Labor Party. Just consider some of these
statements. First, on wage indexation: Last Sunday week, Mr Whitlam said
Labor would support immediate full wage indexation and urge the
Arbitration Commission to accept this at its first hearing
after December 10. Three days later,-Hayden said " I can't
tell when and if full indexation would be brought in it is
not appropriate or wise to say what the Government's submission
( to the Arbitration Commission) would be."
On tax indexation: On Monday of last week, Mr W'illis and
Mr Whitlam, while being evasive on whether tax indexation would
be retained or scrapped this year, said Labor would introduce
full tax indexation next July. Two days later, Mr Hayden said
tax indexation " could be implemented only when the economy
could properly cope with it."
on payroll tax: In his policy speech, Mr Whitlam said Labor
was going to abolish payroll tax. As recently as his Press
Conference last Sunday he reaffirmed this as Labor Policy.
Yesterday, the President of the Labor Party, Mr Hawke, said
abolition of payroll tax would proceed only if employers
guaranteed to take on more staff. He added: " If they were
not going to agree to stimulate the economy and employment in
that way, then the Labor Government would have to look at
alternative methods." / 4
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Other contradictions in Labor policy abound. Mr Whitlam attacks
our promise to abolish estate and gift duties, while Mr Hayden
and Mr Wran both say they favour abltin Mr Dunstan attacks
our decision -to export uraniium for peaceful purposes, hile at
the same time licensing a foreign multi_-na-tional to explore for
uranium just 30 kiloinetres from Adelailde., and encouraging uranium
to be mined and stockpiled at Roxby Downs.
In the background of all this confusion and disarray is poor
Mr Hurford, who said he couldn't say what Labor'i policy on tax
indexation was because he had only read " The Cairns Post" a
shocking slur on a fine newspaper. Wvho said last W,, ednesday that
Labor could not responsibly make any economic decisions seven
months in advance of the 1978 Budget, and who, within days of
that stunning insight into Labor's forward planning, rushed forth
with a hastily conceived tax scheme for the low income earners
Labor had overlooked in their policy speech.
Mr Whitlam, when asked yesterday about this latest switch in
policy, surpassed himself by saying nothing new had occurred:
" I have been saying it all along" he said. An ABC reporter
present commented that puzzled journalists searched their notebooks
in vain for any such previous comment.
One senior Labor Party spokesman was quoted as saying " It's our
fault, we just forgot to mention it". I am sure the quarter
million pensioners, widows, students and others affected will
not quickly forget that Mr Whitlam " just forgot" them. Labor's
half dozen economic spokesmen are slugging out a fine election
campaign among themselves. The campaign will culminate in one
of them winning the post of Opposition Shadow Treasurer sometime
after December
There is also an absolute contrast between our policy of
protecting Australian industry, of protecting Australian jobs;
and the Whitlam Labor Party's obsession with reducing protection,
with making unemployment a deliberate act of government policy
by encouraging imports to undercut Australian manufacturers.
Whe'n Labor was in office, their policies eliminated the traditional
advantages which Australian manufacturers had enjoyed for decades.
Instead of having wage costs far below those in the United States,
Labor's high wage policy forced up wage costs sharply.
Instead of industry benefitting from an inflation rate low by
world standards, Labor set inflation roaring at a rate that
rivalled that of some banana republics.
At the very time that industry's costs structure was being overturned,
Labor introduced the notorious 25% across the board tariff
Cut. Even though they were advised that this would throw tens of
thousands of people out of work.
On 27 June 1973, Mr Whitlam directed that a report be prepared
within three weeks on ways of increasing imports into Australia.
On 15 July, he rece ived the report and three days later he cut
tariffs across the board by 25%, totally indifferent to the fate
of the tens of thousands he put out of work with a stroke of his pen.
lie cut tariffs despite the facL that the report showed, with the
utmost clarity, that tens of thousands of Australian jobs would
be lost. Despite the fact that the report went through ind: ustry/
after industry showing unem-iploym,-ent. would bDe caused.
The Liberal Government is giving Auscuralian industry the protection
it needs. We have shown that it is possible simultaneously to
give effective protection to industries and to reduce inflation.
And we appointed an inquiry under Sir John Crawford to find the
best ways of achieving long term structural adjustment of industry
without unacceptable social costs.
But to talk of rapid structural change for industry now, when
many factories are operating below capacity, when unemployment
needs to be reduced, is in practical terms sheer nonsense.
Yet this is precisely the kind of unreal, impractical theory to
which all but a minority in the Labor Party are firmly wedded,
the type of gross generalisation reflected in Mr Whitlam's speech
to the Press Club in July, when he said: " There is no doubt that
Australian industry is lavishly protected that is the basic
trouble with our manufacturing industry in Australia."
The Liberal Government has taken firm action where necessary to
protect industries under threat, to protect the jobs of the
Australians which depend on those industries continuing.
We have increased protection for industries with a total employment
of over a quarter of a million Australians in major industries
such as motor vehicles, clothing, footwear, textiles, plywood
and many others.
We rejected out of hand the disastrous T. A. C. draft report on
textilesiclothing and footwear. We have taken decisions to
protect those industries for at least three years. Our policy
reflects and protects the interests of the worker in those three
industries -Labor's policy is the precise reverse.
As a consequence of that draft report, we decided to change the
law governing the I. A. C. We have introduced legislation into
Parliament to require the I. A. C. to report on: the assistance
necessary to maintain present levels of activity in the industries
they examine, how each industry's structure might be improved,
the employment consequences of its recommendations, and their
impact on decentralised industry.
We have done this because we believe the I. A. C. shoul-d be required
to take broader considerations into account and not just a narrow
concept of efficiency which all too often seems designed to put
people out of jobs.
The Australian Confederation of Apparel Manufacturers recently
sought assurances from the Labor Party that they would support
our decision to maintain employment and productivity in the
apparel, textiles and footwear industries for the next three years.
There was yet another telephone hook-up an unhappy hook-up
as it turned out between Mr Whitlam, Mr Hawke, Mr Hayden and
Mr Young. / 6
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They concluded that Labor would not be committed to maintain these three
industries over the next three years. Labor's research officer siuirmed
up their attitude by saying Labor was " a free trade party" and wa~ i
committed to the restructuringj of industry.
This makes a mockeryof Labor ' s statements of concern about the unemployed
In government, Labor threw~ tens of thduisands of people out of work
because of their decisions. Tjhey are still ref-usinj to protect
Australian jobs. They are threatening the Jobs of over a quarter of
million Australians in the industries we are protecting.
What a contrast with our policies which give top priority to keeping
Australians in jobs. The Labor Party has chosen sterile
intellectual abstractions over jobs, over the interests of the
working men and women of-Australia. Understandably the working
men and women of Australia feel that they have been betrayed by Labor.
This leads me to the final difference between the parties. That
is the seeming unwillingness or inability of the Labor Party to represen
the interests of Australian working men and women. Labor's policy
on protecting jobs is one illustration of this, Labor's anti-development
stand is another.
The fact that Labor could mount as the centre piece of their policy,
a proposal to transfer resources from taxp~ ayers at all income levels
to large companies reveals the most fundamental loss of touch by
the Labor Party with what was once regarded as its natural constituency.
Many of Labor's traditional supporters are frankly puzzled and
bewildered by this proposal.,. Many of them will reject the Labor
Party because they remember the consequences of its actions
between 1973/ 75 and because -they realise that Labor hasn't changed,
and because of Labor's extraordinary tax proposal. A proposal which
will have shattered many traditional allegiances.
Today, the Labor Party is a minority party. It is no longer even the
Party of the unions. It is a Party of the union leadership of the
union hierarchy, and of those whose views are not based in reality.
While this has been going on, the Liberal Party has been increasing
its support amongst groups that some people regard outside our
conventional constituency. Since we were elected the Liberal Government
has undertaken some fundamental steps of social reform.
Commentators have found it difficult to fit these reforms into their
conventional stereo-types of what they call conservative parties
and Labor parties. Our social welfare policies, have had as their
major priority, the directing of assistance to those people most
in need, our family allowances, our reorientation of the children's
services programmes towards day care of children of working mothers,
our experiments, and our initiatives in the ethnic area.
The Labor Party's reputation as a party of social concern is based
on past history rather than current facts. We have been the Party that
has indexed pensions toincreases inthe Consumer Price Index. Wle ha , ve
been the Party that has lifted the taxation burden for an additional
225,000 lower incomeAustralians. We have been the Party that
redistributed wealth by ending the tax rebates for children and
replacing them with our family allowances. * 7/
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Labor's tax proposals have underscored this contrast in the most
pointed way. When formulating their policy speech, they simply
forgot theimpact of their abandonment of our tax reforms on
225,000 lower income earners.
So across the broad range of policies the choices in this election
are clear, clearer perhaps than in most elections that I can recall. An(
when the parties programmes are considered, it is apparent that on
one vital issue, economic policy, there is, in fact, no choice.
For Labor has failed to offer any credible coherent alternative to
the economic strategy which the Government is pursuing.
I am confident that on 10th December, the Government will be
handsomely returned to office for another three years.