PRIME MINISTER
FOR MEDIA THRSAYL7 OCOBR198,2
LlURPRAI3 PARTY BREFAKFAST,__ BRISBANE
The Commonwealth Garmes have been a great achievement for
Brisbane, for Australia, They have been a window on the
whole coulltry, They have aroused a sert e of nat~. onal pride
not just in Brisbane, andi not just in Queenrsl~ and where they
are being held, but right across the country, They have
demonstrated very much the kind of country Australia is.
The performances by different national groups at the opening
of the Games said something very real about Australia because
overwhelmingly, those different grouips tha-t partic. pate3
hsa. e come to Allstralia because they wanted tLo be free, and
that said something not only to all Australians, it said
riomething to all our visitors, all 6ur guests from overseas.
We noed to remeanber somnetimes thatourowi political philosophy
is based on freedom, freedom of the individual, not on a
great mass of people or something which might help en masse,
but on something which helps individuals, their familiea,
lead the kind of lives they want for themselves, for their
children. Our philosophy is based on establishing a secure
society and a caring society, but always based on the wants,
Q tihne C naenobeedrsroaf, individuals as they judge -it, not as it is judged
I weuld.; 1ike to thank Kevin Cairns who 1, am delighted to see
here. Kevin represented L-i~. ey for a very long while.-. He dia
that ver: y well, and very effectively, but was caught up by
-a narrow sing. Thlat was a very significf~ nt, loss to the
Government and the Liberal Party. Xevin, thank you for
coming here this morning, I know you have maintaired your
interest in the Party,
This -yea s. Budgat & s -introduced against a quite different
background to the~ last three or four because, as a result of
W~ orld recession, the prices we are getting for ex~ port
commodities are down 30% or 40%, and in some cases, it is
dow-n more, and if the. prices are. not dow-ni, the quantities
are down. / 2
1 111. ' p-
LIB BREAK.-2 108
That obviously has an impact in Australia, Secause -of. thle w6ild
recession you are not getting the sort of business inve'stment
decisions that have been. occurringc over the last four or five
years. It was not, therefore, a q~ uestion -in this Budget: of
the~ bvernment drawing back to make room for the privat6 szectr,
but mnayba the Covernmen: doing some things that would assist
in a difficult period against the background In which private
investment by the end of this year will be runninig at a lesser
rate than it Was at the beginning of the year, even though over
the whole year it will still be maintained at a high level.
Until there is a world upturn it is unlikely that the significant
and major business investment decisions that we have seen Over
the last four or five years are going to be repeated.
Against that background we bought down a Budget which haa
significant support for industry and major advances in depreciation
provisions, depreciation for incoome producing buildings for
the first time, It was a Budget designed to help people,
a Budget designed to help families. The tax cuts are ' Significant,
down fri-7. 32 * to 3O', There, is a housing rebate for~ all people
buying their major tomelthe 1home where they live) not for a
holiday home, but the major place of residente and significant
i-ncreases in family allowances and other measures designed
to help families in particular.
Prom 1 November a family on $ 300 a week, a single income family
with a dependent .9pouse . and two % ids, will be about $ 18 better
off as a result of the Budget. If you had to be as
well . off as a result of wage chances, you would need a
wage increase of $ 25 to $ 30. That $ 25 to $ 30 in today's
economic conditions could be enough-to send a firm*
bankrupt ' andl then there would be no job and no business.
That is why wh ile John Hawaxd said it wa s a fa-m i ly Budget and 4Mf a VVezy
real way it was, biA it is also a Budget that should enable
Australians to work together and establishes the basis in which
it is reasonable to expect wage restr~ aint. We have had a
good deal of success in that, I think there was a surprise
when the Remuneration . Tribunal for politicians came out with
a 7% adjustment instead of the 13% or 14% that a lot of
people had been expecting. That was followed by an Academic
Salaries Tribunal of the same kind of judgment,. Most of
the State public services have co-me out with j udgmentsj Of
to That of course is very much less than the rate-6f
inflation. It is a significant advance in terms of the
acceptance of the level of wage restraint throughout this
community that we have not seen for some time, Of course
that is all the more necessary ' a a result-of the wage
breakthroughs last * year and the shorter hours which on
top of the world recession did a great deal of damage to
Australia. The increase in wages and shorter hours, increas. 6
in wages of 15S to 20% at a time when our competitors overseas
were achieving adjustments of 5% or 6% or sometimes even less,
was one which obviously did a great deal of damage to Australian
industry and a great deal of damage to Australian competitiveness.
Comting at a tirne of world recession this jwtst cximpmrded-the dif ficulties
that were going to face us in any case.
2 7.10.82
LIB BRZAK( FAST -3 -7.10.82
Since the Budget of course, we have all becowe aware of the severity
of the drought across the four Eastern States and further
significatit decisio. z have been made which will enable people to
Stay On their farms and stay or, their properties until the seasons
change. The drought has not hit Queensland yet-although-it is
dry in many places--as badly as tlS and Victorial but it l6ok8
like being the worst drought sirtioe the 1930s and Maybe the
worst ever recorded across the Bastern part. of the. continent.
The co-operation that we have had or they have had from us itn
relation to Queensland and the Commonwealth is Very
good indeed. I have got to say there is far less asympathy in
NSW4 and Victoria for ppople out in rural industry. I have.
been disturbed that the carry on loans which have been part
of the four measures between the Commonwealth and Queensland.
for small business hit by drought In this State, have
notbeen3 accepted in NSWI and I don't think they have been
accepted in Victoria. ThIeir policies at this point are shortsighted
and are inadequate, but these are matters that have becen
traditionally negotiated between the Commonwealth and the States
and what we have really been do-ing is to press other States to
adopt the kind of core measures that have been accepted as
a general rule between Queen. lad. and the Coimmonwealth for
qluite Some time.
W'hile this last Budget provided additional help to businesses and
to famillis, While it provided a reasonable increase in capital
works, we nevertheless went as far as we thought we responsibly
could. We would not have wanted Budget deficits larger
than qhat were indicated in the Treasurer's speech. I think
it is worh highlighting that with what Mr Hayden indicated
in hiis Budget speech. He did not add up the figures, but it
would have come out at a deficit of about $ 5 to 6' billion.
1r H-awke -has spoken of deficits of up to $ 6h billion. it is
worth noting that hr Cain in his first Budget in Victoria has
done almost exactly what Mr Whitlam did when he had a chance
to have a go. lie increased expenditure by 24%, hie increased
taxation by 24% in his first Budget. It will be interesting
to see whether Mr Cain can beat Whitlaxn's second Budget
because in that Budget Mr Whitlan increased his expenditure
by 46%. He did not bother doing much about tax~ ation then,
he just went on printing money. The Labor Party does not
learn and I thin'k the economic malaise and difficulties in
N~ SW where the problems of the Wran. Government are now
widely u1nderstood in NSW and the kind of Budget that Mi-Cain
has introduced in Victoria should demonstrate very clearly
Labor has Il* eaxrnt nothing about the kind of policies that
Australia needs, or needed through the ' 70s and on into the
1980S. There are some positive signs in recent days. I do not * want
to make too Much of it because a very great deal is going to
depend'upon what happens in the United States and what happens~
in Europe. Whilt interest rates have started to fall there
and also in Australia, and while industrial disputes in Australia
are at a 13 to 14 year low, and that is certainly good news,
while there is evidence of wage r~ estraint this year, we are
going to need a lift in ex port. prices, a lift in the markets
overseas befor-e we can' see a real resurgence of substantial
growth in our national economy.
LIB BREAKFAST
About 30% of our national income depends upon trade and if
the world is seen as depressed, if industrial production is
falling in major countries overseas, if they want less coal
or less iron ore, or less minerals of other kinds, and if
they are paying less for it, obviously that effects us.
Any Commonwealth Government, any Australian Government that
pretends that it can go on regardless of those world economic
circumstances is only deceiving the people of Australia.
So, what happens in the United States, what happens in Britain,
in France, and in Germany is obviously of significant importance.-
Whateverhas happened in those countries, I believed we have
managed our affairs much better than they have. Unemployment
as we know is too. high here, but it. is about half the level
in Britain, about half the level of France. It is about 10% in
the United States, very much higher than Australia. We halve
had over the last three years more growth in this country than
in any of those others and to that extent we have swum against
0 the tide, but the longer the world recession went on, the more
inevitable it was going to be that it would effect Australia.
In relation to recent events, I have announced a Review of
Commonwealth Administration because there had been breakdowns
in the management, in a sense the ordinary services of government,
in the Crown Solicitor's Office, in the meat inspection service
and in other areas where management skills and structures are
important. I hope very much that John reid and his Committee
can come forward with some significant recommendations. It is
not to be a detailed report like the Royal Commission into
the Public Service, but . a report that hopefully will indicate
some broad guidelines and broad directions which will make*
sure that the Public Service ca. n be put into a position in which
it-can meet and respond to the much greater challenges that-are
in front of us at the present tirte -than might have been the
case, 10, certainly 20 or 30 years ago.
There has been a mild discussion going on about taxation, taxation
evasion or avoidance, and I thought I had better say something
about it. In the early part of the 1970s, I suppose the main
evasion schemes were ones that involved individuals
. and I think to a very significant extent they : have been knocked
off and outlawed. There have been over 20 pieces of legislation
and well over 50 schemes outlawed by legislation that John
Howard has introduced. In addition to this, a new general
anti-avoidance, anti-evasion provision was introduced into the
legislation -and the Tax Office believes that is working very
effectively. That new provision was needed because time after
time after time the Taxation Office was losing its cases
before the High Court as it had earlier been constituted.
The High Court had an attitude to tax which certainly did not
make it difficult for those who wanted to step arou d the
system, and that is not a criticism of the High Court, it was
their interpretation of the law as it is or as it was. But it
did mean that sections in the Taxation Act that had worked
effectively for a very large number of the years, came to
be regarded very much as a dead letter. it is ironic that people
4. 7.10.82
LT3 BREAYFAST-5
are now sayi-ng with a different structure of the High Court
that those old settions that in a sense were damaged by
earlier judgments could in fact be resurrected and would
againi be effective. They have also been buttressed by other
legislation, by the new Part 4A., which is precise and explicit
in relation to the things which it seek& to outlaw.' I ain
told that it is much harder to get aro--und than, the earlier
sections in the Act which of course still stay in the statute
book. In relation to one par ticular scheme, we have taken in a
6ome historic decisions. In relation to bottom of the harbour
8chemes, which I will explain in a little more detailin a
mioment, in 1980 we introduced criminal penalties and five years
jail for anyone indulging in these practices, A8 a resultof
that not too many people have tried since December of 1980
though a great many people tried' before. They are the only
schemea against which criminal pentalties have in fact been
introduded and criminal -peaalties had to be introduced because
the only way'-you. omUd-Voo'k off the d-svice w; 4. s throt~ h taxation leg islati. c.
Then in ad~ dition to that we have introduced-legislation which
is going to collect the tax that was due, remains due, but
which needs some buttress to the law before it can in fact
be collected. I amn not too sure that that is adequately
understood. We are going to collect tax that was due, remains
due, that has been evaded from the people who have benefited
from the evasion.
It is worth noting that ! there have been eiq-nificant cases
in the United 1( ingdom where their highest courts of appeal andwhore
their Lord Chancellor, who is the equivalent of our Chief
Justice, has made it very plain that they heLieve that the strict
observance of the lav? is not a stifficienlt telst of good
citizenship and not a sufficient test as to whether an act should
be condoned or allowed. Trhe~ y use3 the words to the*
ef fect that those who iriadlqe in these practices are well aw~ are
of-the rigour of the contest their*-words, -not mine & nd th~ at
they had no right to complain if their hands got burnt because
governments uiltimately catch up with them.
I know accountants in my own city, who if they had' any clients
who wanted to pursue these particular practices, would have said
to them, " Well all right, hut you hacl better put the money aside.,
because the Government will catch up with this device. we recommend
you do not do it, but if you persist in doing it the Government
will catch tip with and they will insist on collecting ' the money."
Of course if we do not, we betray all the average taxpayers
throughout Australia. It is not the Government that has been
cheated by these practices, it is other taxpayers who have to
pay more as a con-sequence and that needs to be clearly undlerstood.
: 1 do not know how many of you -understand what a bottor of the
harbour scheme is, but it has a number of essential characteristics.
A company was sold which had current year profitsj and sometimea
thoise current year profits were quite substantial, and the
company was put into a position in which it could not pay its
tax. it was sold in a way the vendor shareholders, the original / 6
5
LIDI B1RBAIFAST
ownerrs of the company, got an inflated pr2% e for the shares which
resulted from the tax that should have been paid being translated
into a capital gain. For example, and this is fairly near to
one particular example of what happened or let's . Just say this
is a hypothetical example, but it is-not drawn out of the air.
It might have had $ 3 million in current year profits, a total
cash stock value of $ 6 million, so current year profits compared
to the total value of the company were ob1viously very high,
$ 400,000 might have gone to the promoter and the rest, million,
broken up between six or eight sharebolders and not oine cent
in tax paid before or after the event.
If you put those kina of figures in front of average,-decent
Australians Iandj asyed then, o-you think that is f air, tdo you
think that is reasonable, do you think they should be allowed
to keep the mroney?. or do you think they should b-e required to
pay the tax that the company should have paid which quite a
number of people.-and I would rea1ly-believe all
Al should kno~ w should have been paid? f* you have g6t' something
that is worth $ 1000 and somebody comes along and says I can
pay you $ 1300 for that, aren't yoQ going to wonder whether
something is a bit odd? You might just say well it is your
good fortune, but I. would have thought most people would ask
some questions,
I have known people who had companies that they had put into
liquidation. This was, not liq-uidating companies, this was
just sellimy them and stripping them of their assets. The
term bottom of the harbour came about because it sometimes
ended up that the people who bought themn were Painters and
Dockers who I suppose had changed their identity, They went to
another State this was the kind of service that Ltiion
and the papers were meant to be thrown in the bottom of the'
harbour.-That is how the analogy came and it is the only
reference 1 think tolharbour', There was nobody from whom
the Commonwealth could collect the tax that was and remains
legally due.,
The. only way we can collect the'tax is to collect it from those
who benefited from the device and we think it is fair enough
to do that. There is the principle of retrospectivity which
none of us like, but wh-en people went too far with tax matters
in the United Kingdom, both Conservative and Labour governments
have on different occasions enacted retrospective legislation
which as I have indicated, has been upheld in the highest
courts-. of the United Kingdom. We believe people have gone
siqnificalitly too far in relation to this particular device,
It was patent '. that it was artificial, To some extent,
people involved in it, not necessarily everyone, but people had
to be acting illegally.. We . also owe it all average Australian
taxpayers to collect the m., oney that was due.
We need to understand very clearly-the origins of our own Party,
why it was formed, the reasons it was formed., It was f ormed
to give average Australians a fair go in a political system
that had not * always given them a fair go. We are the only
Party that can do that. our colleagues in coalition., represent
rural interests more than the total national interest and so
far as the Labor Party is concerned. with their organic links
6
LiB BRPEATKFAST-7
with the union movement, they can never repreisent all Au. 1traliaris
fairly or eqlually. So it was the Liberal Party that was formed
to do this job aknd-it has by and large over the year6, done
it very well indeed.
We -need to kmnder stand c-that the Liberal Party is not and
never was a Party which represents the interests of the wealthy,
or the privileged. It is a Party which believes in governing
in the interests of everyone, not on behalf of special groups.
demanding special privileges, Any other basis would undermine
the Australian sense of a fair go and equity which the Liberal
Party stanids for. This philosophy is not new to Liberals/ it
is basic to whatever we have ever stood for. we have always
believed. in it. In 1945 Sir Robert Menziea. in the Party's
provisional policy statement declared as Liberal watch wordst
" A fair deal and a good opportunity for everybody, no privilege
if by privilege we mean advantage." Xnd he went on, " To us,
Australia is 7 million individuals, the progress of each of
whom. is a priceless asset to Australia anxd the horiest
contribution of each of whom is the essential foundation of
all good community life." That declaration is as true today
as it was 3' 7 yeara ago We -are determnined to govern fairly
for all Australians because Australia is 1.5 million individuals
all of whom want and deserv~ e a f air and equal go, and the
Government is going to make sure that they get it.
We in the Liberal Party above all must never lose sight of
a basic necessity for the Liberal Party., a basic nect~ ssty
for the Government, to govern fairi',' for all
We never allow po.. ex, or mone-y or pri-vileqe. to influence our
policies. It is justice, the right the fa4. r that determines'
what the Liberal Party must do and what my Government will, and
is doing.
I can uniderstand opposition to ret-rospectivity as a principle
and I think all members of the Federal Goverrnment wouad
dialike retrospectivity as a principle and I certainly share
0 that view. Blut because of the action of certain people,
because of the action of the few who engageA in. bottom of the
harbour operations, it iso'so easy for the defence of no retrospeCtiVi
to be construed as a defence of tax evasion. Y'ou have got the
principle of retxospectivity standing against -the principle
of fairness., and the Government is determined that the principle
of fairness must be given priority in this instance. Nobody
should be expected to pay more ta; than they need to. Nobody
should be expected to forego the reasonable use of legally
allowable deductions, but there is a big difference between
this and the pursuit of blatant and artificial schemes which
result in contrived : ductioiis from tax, evasion from tax
or breaking of laws. These practices can only result in the
unreasonable or illegal adv. antage of the few at the expense of
the vase majority of Australians, The practices are un-Australian.
They betray the proper sense of -community. and they defy all
the basic tenets of the Liberal Party and the principles for
which the Government stancds.
The, reason for our Party's3 existence is to stanzl for average
Australians, to defend their interesta and that is why I
eo strongly believe that the Liberal Party must diassociate
itself from those practices, why it must stand for the basic
7
LIB BEAKF'ASTvalues which led to the foundation of the Liberal Party, why
it must never be captured or allow itis. polipiep to be captoired
or influenced by any'thing other than the interests of all
Austrailians. The politics of greed and selfishness which
are the politics**: of bottom of the harbour operations have
no part in Liberal politics or Liberal philosophy
have no part in the Party that I lead. Fairness an working
together, these are principl~ es which are important to us
and we need to un~ derstand that it is governing for all Australiana
that is the important tning for the Liberal Party.
If art'orie bielieves that they can stand on a
platform and defend the kind of figures which I just read
out which could be copied time after time again from company
report after company report, time after time again, and then
say that they are governing fairly for all Australians if they
allow that to continue, or people to profit from the practices.
they don't understand any part of what motivates the
heart of average Australians, The Liberal Party needs to
think of that and ask itself someti-mes where it wants to go,.
This is one of the serious timss ina the history of the Liberal
Party.. -* Ther: e is no doubt that the
legislation that is in the Parliamet-t . will gset. passed,. 7hh-: e . has
not been any doubt about that for weeks, I have been sayinlg
there has been n~ o doubt and people should rea~ lly take that
at face value because that is-ihat is going to happen. We
need to understand* and we need to rsanernber why this party was
fOurE& -and reaffirm our faith an~ d commitment to those reasons
and not get diverted by other causea and other interests.
There is another thing I should say. This is the opening of*
the Lil -ley caripaiqn. I don't know ho~ i ' axy rura~ rthis will1I6.3 ' to
about the federal cxqpagh' ~ e u if I cold p. olit out the fallacy of
some of the past rumtours I think 25 September was the
favoured day and that was the day in. which Carlton was going
to win the grand final and there was no way in which I could.
possibly have an election on that day. it anyone kn643 Victoria
you could not organise an election on grand final day'. The
whole Liberal Party would be on strike, So, I am sure
not too many of you believe what you read in the newspapers.
One day there will -be an electioni, but I do not know when
it is. Lvezyone else has been saying I do, but I do not,~
One morning I will wake up and will know.