E&OE..............................................................................................
Well, thank you very much Mrs Barker. To my parliamentary colleagues
Peter Lindsay, and Ian Macdonald, to the many other distinguished
guests, ladies and gentlemen. Gee this is a terrific venue for a lunchtime
meeting. It is absolutely magnificent and how marvellous it is to
be here in Townsville and how marvellous it is to have an opportunity
of saying a few words about the Government's taxation plan for
the next century. There have been many descriptions given about the
plan and there have been many attempts to put a label on it. Some
talk about a GST, some talk about the tax cuts, some talk about this
or other aspects of the plan that we unveiled last Thursday, but above
and beyond individual sections of the plan, I want, and the Government
wants this to be seen as an integrated attempt to deliver for the
benefit of Australia and for all Australians a taxation plan, a taxation
reform that will sweep away the existing system and replace it with
one that is modern, is contemporary, is relevant and will be in the
long-term economic interests of Australia.
I don't find many people in Australia defending the existing
taxation system. Even those who have criticised the present system,
criticised our plan, will acknowledge, when you talk to them, they
will acknowledge that the present system is out of date. We share
in company with countries such as Botswana and Ghana the maintenance
of a wholesale tax system that was devised in the 1930s when the great
bulk of the Australian economy was based on manufacturing, when the
wholesale sales tax may conceivably have made some sense. Everybody
acknowledges that the present system is flawed, is frail, and is badly
in need of replacement wholesale replacement.
I've said frequently in the past few days that I was elected
to Parliament in 1974, half-way through the Whitlam experiment. And
within a year of my being in Parliament there was a report tabled
called the Asprey report and it was a report shared by a former judge
of the New South Wales court of appeal into Australia's taxation
system. And you know what the report recommended, and this is in 1975
23 years ago the report recommended that we should introduce
a broad based indirect tax and it should apply to virtually everything
and it should replace the existing tax system and it should be accompanied
by reductions in personal income tax. Now, it recommended a lot of
other things that we haven't picked up but that was the essence
of that recommendation, and now, 23 years later, the need for that
kind of fundamental reform that was identified in the mid-1970s is
more pressing, more urgent and more desirable. Now , I know it is
not easy and I have no shortage of people saying to me over the past
couple of weeks, you shouldn't be attempting a change of that
magnitude - it's too risky. Well, let me say in response to those
people, it is necessary to take risks of a personal political kind
in the long term national interests of Australia and the Australian
people. And that is why we are putting this forward as an integrated
plan. We don't believe the Australian people will respect a proposition
that says oh look you don't need to reform the present system,
but we'll offer you a tax cut. I mean, a lazy tax cut has no
credibility at all, but a personal tax restructure that is part and
parcel of an aggregate reform to the Australian taxation system, I
believe, will win very wide support in the Australian community.
Now, there is no one interest group in Australia that has got everything
it wanted out of this tax plan. We didn't set about to satisfy
every individual interest group. What we set out to do was to design
a structure that would deliver a more productive, more efficient Australia
and would be beneficial to the Australian community. We took account
of the views of interest groups, we didn't seek to produce a
plan that aggregated all of their demands. Now you ask me what is
good for Australia about this plan. The best thing about this plan
for Australia is that it reduces the cost of producing goods and services
within our community. It represents the biggest single proposition
by any Government in Australia since World War II to reduce the cost
of doing business.
The introduction of a goods and services tax, to replace the wholesale
sales tax, the financial institutions duties and bank account debit
taxes where they exist, stamp duty on business conveyancing, stamp
duty on shares, stamp duty on promissory notes, cheques and bills
of exchange, the massive reduction in fuel costs which I'll come
to at the moment which is so important to the bush to regional Australia.
All of those things together mean that when this plan is introduced,
the costs of doing business on an annual basis in Australia will be
reduced by approximately $10,000 million. It represents the most generous
export market development grant that any government has offered to
the exporters of Australia, because it will take $4.5 billion off
the costs of exports. There will be no GST on Australian exports and
all of the taxes paid on exporters inputs will be fully rebatable.
It will mean that exporters from this country will be able to compete
on an equal footing with those from other countries seeking access
to the same markets. I often get requests from people in exports saying
why don't you have a special incentive for exporters.
I can't think of a more special and better incentive for exporters
than to take $4.5 billion off their export costs by the introduction
of this plan. It will of course, by delivering a more efficient, a
less costly method of production in this country, it will of course
open up the opportunities for greater job generation. I did a local
press conference this morning, and I was asked by a young lady from
the university, what is this plan going to do for the university students
and my answer was that it will increase your chances of getting a
job when you leave university, because it is going to take costs off
the back of business which haven't been proposed before. Now,
it doesn't take all the costs off the back of business that they
would want but it takes more costs off their back than has ever been
offered in the past. And of course the plan does contain some very
particular provisions which are of enormous long term importance to
people who live in the bush, to people who live in regional Australia.
I've been coming to Townsville now for, as a politician, for
almost 25 years, and I can't remember a visit to Townsville that
hasn't involved somebody complaining to me about the relatively
high cost of delivering goods to this part of Australia compared with
some of the major population centres. So what we have done in this
package and we have done spectacularly is to attack the tyranny of
distance which bedevils the costs of operating businesses and keeping
households together in regional areas of Australia. But what we are
doing is to reduce the business, we are reducing by about $3.5 billion,
the cost of fuel in this country. We are doing it in a number of ways.
The first thing we are doing is we are going to reduce from 43 cents
a litre to 18 cents a litre the excise on diesel used by heavy load
vehicles and the same concession will apply to rail, exactly the same
concession.
In addition we are going to extend the, maintain and slightly extend
the existing exemption in relation to the use of diesel for off-road
purposes, and that will continue and slightly expand the concession
that is now available for primary producers. And a like concession
will apply in relation to ferry and tour boat operators using equivalent
fuels so it is not something that is simply limited to one particular
of the community. Now the impact that this will have on reduced transport
costs around Australia is quite enormous. Many people talk to me about
prices in supermarkets under a GST and they say quite wrongly oh everything
is going to go up by 10%. That's wrong. A lot of things won't
go up by 10%, in fact the average increase will be about 1.9% and
the reason that things won't go up by 10% is that a lot of goods
in supermarkets, a lot of things you buy now are subject to wholesale
sales taxes which are much higher than 10%, a whole range of detergents
and soap powders are taxed at rates of in the order of 22%. There's
a 12% tax now on flavoured milk and some kinds of biscuits and on
orange juice concentrate. There's a 22% tax on the family motor
car, and so the list goes on and on and on.
But there's another component to this argument and that is that
for every item that is delivered on to a supermarket shelf about 20%
of the cost of that item is accounted for by transport costs. You've
got to deliver things from markets, you've got to deliver things
from wholesale warehouses, and all of that involves transportation,
and all of that is very expensive, and if you reduce dramatically
the cost of that transportation, particularly when the goods are delivered
to remoter areas of Australia, particularly when the goods are delivered
to North Queensland, you will get an enormous additional benefit and
it has been calculated at about 20% of the total cost of every item
you take or buy off a supermarket shelf is accounted for by the cost
of transport. So this diesel concession is of huge benefit to the
bush, it is of huge benefit to regional Australia and I should remind
you, although it hasn't been my intent to make an excessively
partisan political address, I will nonetheless take the opportunity
of reminding you that the environmental spokesman for the Australian
Labor Party, Mr Duncan Kerr, has attacked the proposals we have in
relation to diesel excise because he thinks they would be bad for
the environment, and he has made it very very clear that the Labor
Party is opposed to those particular concessions. But there's
another little rub, and a very nice little rub in relation to the
cost of fuel and that is that every business operator, quite apart
from whether you are involved in diesel or on-road or off-road, will
now be able to buy their petrol effectively at 7 cents a litre cheaper
because under the new proposal we are going to reduce the petrol excise
by the extent necessary to allow in the 10% GST, and because the GST
will be fully rebatable for business purposes in the way that petrol
excise is not, you will effectively find that your, for business purposes,
and I stress that, you will find that your petrol for every business
purpose is 7 cents a litre cheaper because you will be able to obtain
a full rebate of it.
Now I mention these things ladies and gentlemen because one of the
aspects of the plan is that there are different parts of it that have
a different impact on different areas of the Australian economy, but
I stress again that the great appeal, the great virtue, the great
strength, is that this is a plan for Australia's future. It is
not a lazy attempt to nibble at the edges. It is not an attempt to
say to the Australian public, you can have the benefit of a personal
tax cut without the necessary reform to strengthen the Australian
economy. We all know that that option is no longer really available.
We had that tried in 1993 when Mr Keating and Mr Beazley said, oh,
you can't have Hewson's GST, we'll give you a tax cut,
we'll make it L-A-W law, what happened after the election was
that the tax cut disappeared and every individual sales tax went up
by 2%, and that was very regressive. And there was no compensation
for the pensioners in 1993, there was no compensation for them, and
there were no special arrangements, and the impact of that increase
in indirect tax was infinitely more regressive than would have been
the case if the Hewson plan had been endorsed by the Australian people.
I notice this morning that the ACOSS, speaking as it claims on behalf
of a number of welfare bodies, has attacked the plan, and I want to
say in reply to ACOSS that we, of course, reject the calculations
that they have made in relation to the price effect of the plan. We
repeat the guarantee that is contained in the announcement last week
that the pension and other benefits enumerated in the document will
increase up-front by 4% on the 1st of July in the year
2000 and thereafter we guarantee that there will be a 1.5% add-on
to any CPI increase that occurs after that date. And the purpose of
that will be to ensure that the pension is always in real terms 1.5%
ahead of increases that occur in the consumer price index. And that
is the essence of the guarantee we give, so if people say: well we
don't think that 1.9 is right, my reply to that is: it is right.
But even if it weren't right and the rise happened to be 3% you'd
have 1.5% on top of that. And that is the nature of the guarantee
that is contained in the Government's proposition because we
have no desire to see the less well off in the Australian community
effected adversely by this plan.
And I took the opportunity yesterday when I visited a retirement village
in Brisbane to enumerate that there were ten individual elements of
the plan that were of direct relevance to pensioners and self-funded
retirees in the Australian community. And they include a special one-off
untaxed payment of $1000 in relation to investment income for all
pensioners and others in the community 60 years and over. Another
$2000 on top of that for self-funded retirees of pensionable age.
The introduction of refundable imputation credits - sounds complicated
but anybody who's got some shares and whose marginal tax rate
is lower than 36% will understand the value of refundable imputation
credits. They are little rippers, that's all I can say in relation
to people who are going to get the benefits of them.
And then going on from that you have the introduction of a 30% tax
rebate for private health insurance. If you've got a $2000 policy,
doesn't matter what your income is, from the 1st of
January next year you'll be able to get that $600 back from the
tax man or if you can't wait for the tax refund you can take
the receipt for the health insurance premium along to the Government
office and they'll write out a cheque for you on the spot for
$600. And that is going to be available from the 1st of
January next year. And that is going to be available without an income
test, there won't be an income text on that.
And I'm particularly proud of the changes that we've made
in relation to personal income tax. I make no apology for the fact,
although it may disappoint some in the community, that we haven't
reduced the top marginal rate. But we have increased the point at
which that applies. We've increased that to $75,000. But what
is very very appealing, most appealing of all about the restructured
income tax scales is that between $20,000 and $50,000 of income there
will be a constant uniform rate at the margin of 30%. In other words
81% of Australian wage and salary earners, 81%, and we should always
keep these figures in our minds so that we have a true perspective
of how these things impact on the great bulk of our fellow Australians.
81% of wage and salary earners in Australia will be on a top marginal
rate of 30% or less.
And those of you who employ people and have had the experience, they
may be earning $30,000 a year and you want them to do some overtime
and they express some doubts and the grumble say: what's the
point? The tax man will take half of it. Now under this plan, if you
are anywhere between that band of $20,000 and $50,000, or indeed if
you are $20,000 a year, you'll be able to earn as much overtime
as you like up to an aggregate of $50,000 without passing into a higher
taxation bracket. And that does represent a very very significant
change to the taxation system, of enormous importance to the great
bulk of the Australian community. And what it effectively does is
to abolish that thing called bracket creep which the economists keep
talking about. That is when you get flung into a higher tax bracket
because your income goes up. It effectively abolishes bracket creep
between $20,000 and $50,000 a year.
And I'm also very proud of the changes we have made to family
tax arrangements. There's been the odd journalist who's
been running around the country saying that Howard wants women to
do this or that, he wants them all to stay home. Nothing of the kind.
What I want is to give Australian parents a choice about how they
organise their lives when they've got young children. What we
have done is to give a greater recognition to the right of Australian
parents, particularly in the middle-income area, to exercise a choice
when their children are very young about the participation of either
or both of them in the work force on either a full-time or a part-time
basis. It's not my job or my desire to impose some kind of stereotype
on Australian families. It's my desire to give the maximum amount
of choice to Australian families within and through this taxation
system.
Could I just say one other thing that was raised by ACOSS in its response
this morning which I think we should all bear in mind. And that is
that ACOSS is arguing that we should exclude food from the operation
of the goods and service tax. Now the problem with doing that of course
is that once you decide to exclude fresh food you then come under
enormous pressure to exclude things that are closely aligned to fresh
food. In Canada I think it is, they have an argument because the GST
applies to a heated pie bought in a take-away shop but it doesn't
apply to a frozen pie bought in a supermarket. One is regarded as
not quite food in the sense of the GST definition and the latter one
is regarded as in that definition. Now what would happen in this country
is that if you left out fresh food, you'd then have people saying:
well hang on, if you're going to leave fresh food out, you've
got to leave out Hungry Jacks, you've got to leave out Pizzas,
you've got to leave out McDonald's. And if you leave them
out you'd have to leave out every restaurant in the country as
otherwise you would be setting up absolutely unreasonably barriers
and artificial distinctions. And once you start doing that you are
back with the same problem that we have with the present system. And
I can't think of anything that would be more, in relative equity
terms, I can't think of anything that would be more beneficial
for the rich in Australia than to take a decision in the name of helping
the poor that ended up leaving restaurant meals completely out of
the operation of a GST yet you're imposing it on other sections
of the Australian community.
Now ladies and gentleman, as I said at the beginning of my speech,
not everything in this tax plan is acceptable to everybody in Australia.
We didn't set out to try and satisfy everybody on everything
they want. That is absolutely impossible and governments that set
out to try and do that are doomed to failure and doomed to disappointment.
But what we did set out to do as we come towards the 21st
century, as we come towards the third millennium, is to say to the
Australian people something that they all deep down know, and that
is that the present tax system is unsustainable. The present tax system
is increasingly unfair. The present tax system is increasingly in
disrepute. The present tax system holds back the productive sector
of the Australian economy. And we haven't sought to insult the
Australian people with just the offer of a lazy tax cut and say: oh
we'll try and bribe your support by offering you a tax cut out
of the surplus. We haven't done that. What we have tried to do
is to say to the Australian people, before the election and not after
it, before the election, we believe that in the interest of the country
and in the interest of Australian families we need taxation reform.
Part of tax reform is lower personal income tax, but that's only
part of it. A part of tax reform, and it's essential, is the
introduction of a goods and services tax and the replacement of all
those existing indirect taxes. Part of tax reform is to reduce fuel
costs because this is a very big country. Part of tax reform is to
end the annual unseemly wrangle between the Federal Government and
the State Governments over the division of the total amount of revenue
collected in Australia and we've done that. Part of tax reform
is to get rid of the poverty traps in the existing income tax system
and give poorer families a greater incentive to work and to get off
welfare. Part of tax reform is to give people a greater incentive
to take out private health insurance. Part of taxation reform is to
have a more uniform treatment of the taxation of different business
entities whether they be trusts or companies or other business entities.
In other words, we have tried to take an aggregate approach for the
aggregate interests of the Australian people. We haven't set
out to add up all the complaints and all the logs of claims of individual
interest groups, rather we have asked ourselves: what is the sort
of tax system that the Australian community wants as it goes into
the 21st Century? And that is what we have sought to deliver.
I don't under estimate the fight ahead but I'm greatly enthused
about it because I believe it is good, I believe it is right, I believe
it is in the interests of all of the Australian people and that if
we can get this plan accepted by the Australian people it will be
of enormous long-term benefit to the economy of this country. And
I ask the Australian people to judge it in the national interest rather
than in the sectional interest. I ask the Australian people to see
it for what it is. It is a bold courageous visionary plan to give
this country a tax system fit for the 21st Century.
Thank you.
[Ends]