Illilpi

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The way to rebuild and rewarc

Fightback!
CONTENTS
Page
Executive Summary

1.
2.

Australia at Risk
The Roots of National Decline

11
12

3.
4.

Individual Values & National Goals

Framework for Certainty:
A New Role for Government

23

The Challenge
Meeting the Challenge - An Integrated
Strategy for Jobs and Growth
Conclusion

30

5.
6.
7.

26

36
66

PARLIAMENT OF AUSTRALIA
HOUSE OF REPRESENTATIVES

21 November 1991

To All Australians
On behalf of the Liberal and National Parties, we are pleased to present our FIGHTBACK
PROGRAM for rebuilding and rewarding Australia
This program is based on an honest assessment of Australia's current problems and how we can fulfil
our great potential as a country.
It is a program that puts forward bold measures across a wide range of policy issues. It is unprecedented
for any Opposition in Australia's history. It is an integrated package of reforms aimed at giving the
Australian people greater control over their own lives and a reliable framework of policy to restore their
prosperity.
Our reforms defy the conventional wisdom that Oppositions should let Governments lose elections.
We believe that the current economic and social crisis in. Australia, which is the most serious since
the Great Depression, demands that we do more than just condemn this Government's obvious
failings.
Real national leadership does not lie in exploiting the unpopularity of a failed government, but in
addressing national problems in a realistic way and in defining a strategy to overcome them.
We believe that there needs to be a generational change in the direction of public policy, in the role
that governments play in people's lives and in community attitudes. To "surprise" the Australian
people with our policies after the next election would not only be dishonest, but it would also j eopardise
public acceptance of the changes that Australia desperately needs.
By providing a dramatic boost to productivity and economic growth, the reforms set out in this
document are designed to provide two million new jobs and halve the unemployment rate by the end
of the 1990's. The job-destroying policies of Labor - centralised regulation of the labour market, the
promotion of union power, compulsory levies, high taxes, big spending and government inefficiency
- will all be reversed.
Ours is a program which will stabilise and reduce the foreign debt which is making Australia one of
the most vulnerable economies in the world.
The Liberal and National Party program is designed to bring about a major change in attitudes which
will make these goals possible. It will restore incentives to work and to save. People will once again
have a chance for financial independence and be able to break free of dependence on government.
They will be able to have a soundly-based confidence in the future.
.12

2.

The burden of income tax will be greatly reduced, marginal rates will be slashed and the taxation system
will be reformed to make it simpler and fairer. There will be an unprecedented attack on government
waste and inefficiency, and a program of privatisation will enable the essential services of government
to be provided more effectively at less cost.
The role of government will be properly defined, so that government concentrates on providing a fair
and certain framework of rules for private activity, protects the weak in the community and
concentrates on advancing the public interest rather than just particular favoured interests.
Social objectives are just as important as economic goals. Standards of education and training will be
raised to world class levels. The elderly and retired will have more equitable protection than in the
past. The unemployed will be given active assistance to get back into the workforce and to upgrade
their skills.
At the present time too many Australians are suffering from the blight of joblessness and lack of
confidence about their own future and that of their country. For a whole generation, governments have
failed by promising more than they have delivered. Government has got us into out current difficulties
because it has robbed people of the freedom they need to build the kind of country they want.
There is really only one question which Australians should ask: are you less prosperous and less
optimistic now than when the Hawke Government came to power? If so, there is an alternative which
is put forward in this document.
It is time for Australians to fight back. It is time for a new generation of leadership in government
for our country.
Our program of reform crystallises the choice facing the Australian people.
It is a choice between passing on to our children a country with expanding opportunities or being the
first generation in Australia to hand on to the next fewer opportunities and a lower standard of living
than they themselves enjoyed.
It is a choice between a tired, divided and paralysed government and one with new optimism and a clear
strategy to make our country what we know it can be.
The choice is yours!

DR4OHN HEWSON, MP
'

i eral Party Leader

Leader of the Federal Opposition

MR TIM FISCHER, MP

National Party Leader

EXECUTIVE SUMMARY
high taxes, high real interest rates and a
centralised wage system resulting in record
bankruptcies, falling investment and fewer jobs.

1. THE CHALLENGE THAT FACES

AUSTRALIA
Australia, with the quality of its people and the
advantages of its great natural resources, should be a
nation of expanding economic opportunity, rising
living standards and social progress. Yet, over
recent years, it is clear that we are being held back
from making the most of our opportunities and that
many other countries with less natural advantages
are achieving much more.
We can't go on like this.
It's time for Australians to fight back against the
Labor Government's economic mismanagement and
policy failures that have resulted in the worst
recession since the Great Depression.
Australians have seen their living standards
eroded over the last eight years under the
pressures of inflation, taxation and
unemployment.
They have seen nearly 1.5 million Australians
unable to find the work they seek and
unemployment among our young people at
around 30 per cent.

They have seen our education system and

training opportunities failing to keep pace
with the standard of the world's best.
They have seen a Labor Government unable to do
what is necessary to modernise our basic
national infrastructure - our waterfront,
telecommunications, aviation system, land
transport and utilities.
They have seen our health system eroded by
Iack of access, lack of choice and financial
difficulties.

2.

HOW AUSTRALIA CAN MEET THE

CHALLENGE - AND FIGHT BACK

The Liberal/National program of reform set out in

this document is an honest attempt to face up to
Australia's problems and to develop an appropriate
strategy to meet them.

They have seen Australian families subjected to

increasing pressures as a result of economic
conditions.

We have developed our wide-ranging 20 point

reform agenda on the basis of a clear set of priorities.
We believe that these priorities are the only basis on
which Australia can successfully overcome its
current serious economic and social problems.

They have seen Australia's foreign debt soar

over the last eight years to the point where we are
now one of world's most vulnerable economies.

We want to give Australians more incentives and

opportunities to get a job, to work harder and be
rewarded for it, to save, to invest and to export.

They have seen our national productivity

growth undermined by Labor's Accord which
has kept wages down and has resulted, in the end,
in record high unemployment.

We want to focus on the wellbeing of the average

Australian, particularly the PAYE taxpayer on
low to middle incomes who have been taken for
granted by the Hawke Government but who are
the real victims of its economic mismanagement.

They have seen their tax burden rising over

recent years thus destroying any incentive for
average Australians to work harder or save more.
They have seen Government welfare spending
become the fastest growing area of the Hawke
Government's spending over recent years and a
continuing drift to greater dependence on
government welfare. Since 1970, the number on
Social Security income support has grown by
about one million each decade.
They have seen Australian business weighed
down by increasing government regulation,

Executive Summary

We want to give all Australians a right to

financial security and self-respect by promoting
price stability and full employment as the key
objectives of our policies.
We want to stabilise and then reduce our
foreign debt.
We want to let Australians show how they can
match, and beat, the best in the world when
the official, the taxman and the regulator get off
their backs.

 We want to focus on excellence and match best

international practice across the board.

taxes and introduce a broad based Goods and

Services Tax.

We want to decentralise more responsibilities

to local communities rather than
concentrating them in Canberra.

These changes are essential if jobs, incentive,

opportunity and reward are to be restored to
Australians. A Liberal/National Government will
have the courage to implement them. We will do so
in a way that is equitable and that enables many
other reforms that will make our society more
genuinely fair.

We want to give people the maximum

opportunity to take personal responsibility for
themselves and their families.
We want Australians to have access to a world
class education and training system to enhance
economic growth and genuine quality of
opportunity.
We want to give a clear emphasis to individuals
over institutions (eg. in education, industrial
relations and other policy areas).
We want to see Australia develop as the second
most important financial centre in the AsiaPacific Region by the Year 2000.
We want to see a new role for government one that is generally in the public interest, and
not particular vested interests, one that is less
costly, but more effective, small but more
respected, less intrusive but one which ensures
equity through equal laws and opportunities.
We want to see both the Federal Government and
the bureaucracy become much more in touch
with the people they are supposed to serve.
We want to ensure that the sick, the old and those
genuinely in need receive the assistance they
deserve but we want to put an end to the rorts
and abuses of such assistance by people who
can, and should, provide for themselves.
We want to ensure streamlined development
approval procedures that meet high and clearly
administered environmental standards.

KEY INITIATIVES IN THE

LIBERAL/NATIONAL REFORM
_. PACKAGE

3.

To meet the challenge that Australia faces, a Liberal/

National Government will implement an integrated
package of major policy reform. It is a strategy for
jobs and growth which will produce two million
additional jobs by the end of the decade and halve
the current unemployment rate and repay about $13
billion in government debt.
It is also a strategy that requires some difficult
decisions (as in reducing government expenditure),
and a major reform of the taxation system that will
abolish many of our existing and inefficient indirect

Our specific policy initiatives include the following:

the largest personal income tax cuts in
Australian history (a 30 per cent reduction of
around $13 billion):
tax rates will be slashed across the board;
95 per cent of taxpayers will face a marginal
rate of tax of 30 cents or less;
taxpayers will be able to earn $75,000 and pay
a lower marginal rate of tax than they now pay
if they earn above $20,700;
abolition of seven taxes;
the wholesale sales tax;
payroll tax;
petroleum products excise;
superannuation lump sum tax;
customs duties (to be phased out by the Year
2000);
training guarantee levy;
coal export duty;
significant cuts in capital gains tax and fringe
benefits tax;
changes to the capital gains tax to provide
significant tax relief, incentives and retirement
benefits for small business people, farmers and
small investors;
introduction of a 15 per cent Goods and
Services Tax (with specific items zero-rated or
exempt) that will:
reform and simplify Australia's grossly
inefficient taxation system;
boost our national productivity and savings;
enable greater international competitiveness
by slashing taxes on business inputs and
-exports;
Executive Summary

 assist in reducing marginal tax rates and thus

increase incentives to work, save and invest;
make the tax system fairer by reducing
avoidance and evasion;
we will adequately compensate Australians for
the net one-off price effect of the Goods and
Services Tax package;
establishment of a full-time Goods and Services
Tax Planning and Co-ordination Office with Sir
William Cole as. its Chairman.
reduction in cost disadvantages to business by
20-50 per cent as a result of our reform package;
a co-ordinated anti-inflation strategy built on a
commitment to medium-term price stability,
competitive labour market arrangements, more
than adequate compensation to low and middle
income earners for the one-off CPI impact of the
Goods and Services Tax, and a new role for the
Prices Surveillance Authority;
gross reductions of $10 billion (net $4 billion)
in wasteful and unnecessary government
spending;

earners and the elderly, together with a new

surcharge on high income earners who do not
take out private health insurance;
a new superannuation rebate scheme to give
low and middle income earners an added
incentive to provide for their own retirement;
a new GST Tax Credit system to assist low
income earners with taxable incomes below the
post-GST tax free threshold of $7000 and part
pensioners and beneficiaries who cannot be fully
compensated either through the tax or social
security systems;
a new GST wealth compensation scheme to
compensate retirees over 60 for the GST effect on
their savings;
a family assistance package, targeted at low and
middle income earners that includes:
a doubling of family allowances to eligible
families and significant increases for many
others;
an increased Dependent Spouse Rebate for
families with children on incomes up to
$75,000;

a major program of privatising Commonwealth

authorities which undertake essentially business
functions and contracting out of particular
government services;

new incentives for low to middle income

earners and the elderly to take out private
health insurance;

a new national savings strategy built on:

increases in the Family Assistance

Supplement;

tax concessions for long term savings through

a new voluntary and fairer superannuation
scheme that will encourage Australians,
particularly those on lower incomes, to make
provision for their own retirement in either
superannuation funds or other financial
institutions, co-operation with their employer;
incentives for shorter-term savings through a
new Tax Free Savings (TFS) scheme;
labour market reform to return negotiations
over wages and conditions to the workplace and
thus to make enterprises more productive and
rewarding;
major new programs in education and training
which will boost spending in those areas by $3
billion over the rest of this decade;
new initiatives for the unemployed which
include restoring job growth, expanding
education and training programs, and enabling
earlier access for the unemployed to programs
that combine employment and training;
a new private health insurance tax credit
system targeted at low and middle income
Executive Summary

wide-ranging proposals to increase assistance to

pensioners and retirees through:
significant income tax cuts for taxpaying
retirees;
eight per cent increase in pensions to over 28
per cent of average weekly earnings;
access to the GST tax credit and wealth
compensation schemes;
access to the Private Health Insurance Tax
Credit which will cover the cost of private
health insurance for pensioners with incomes
below $12,000 (single) and $14,500
(married);
changes in the capital gains tax particularly in
relation to lower marginal rates and sales of
businesses by retirees;
access to the Tax Free Savings scheme;
the Coalition's commitment to end age
discrimination and compulsory retirement
through the deferred pension plan;
3

 simpler reporting procedures for pensioners

and beneficiaries;
access to pharmaceutical benefits for nonpensioner retirees with incomes up to $40,000
(single) and $50,000 (married);
the lower cost of petrol.
a new First Home Owners Scheme;

increase the corporate tax rate to 42 cents to align

it with the significantly reduced top marginal
personal income tax rate, and thus eliminate tax
avoidance through incorporation;
guarantee the return of revenue from tax bracket
creep to taxpayers;
provide tax credits from $100 to $400 for low to
middle income earners who take out private
health insurance;

a more realistic immigration program;

a new approach to Commonwealth-State
financial relations, particularly in relation to
revenue sharing arrangements.

4. KEY DECISIONS IN MORE DETAIL

4.1 Personal Income Tax
A Liberal/National Government will:
implement the largest personal tax cuts in
Australian history:

encourage higher income earners to take out

private health insurance by adding a surcharge to
the Medicare levy for families with incomes
above $50,000 and singles above $40,000 who
do not have private health insurance;
increase the Dependent Spouse Rebate for
eligible families with children to $1,679;

we will slash personal income tax by about 30

per cent - that is, by $13 billion;

implement a major new initiative to ensure that

low income earners are more than compensated
for the impact of the Goods and Services Tax
through a Goods and Services Tax Credit system;

we will raise the tax free threshold from

$5,400 to $7,000 with the result that at least
another 320,000 low income earners will now
pay no tax;

adjust specific thresholds and allowances under

the Income Tax Act for the impact of the Goods
and Services Tax;

we will cut marginal tax rates across the

board, especially targeted at middle income
earners;
95 per cent of taxpayers will face a marginal
rate of 30 cents or less: under Labor, over a
half of all taxpayers face a rate of 38 cents or
more, up to 47 cents;
average Australians will be able to double
their taxable income and still pay a marginal
tax rate of 30 cents;
when our reforms are implemented, taxpayers
will be able to earn up to $75,000 and pay a
lower rate of marginal tax than they currently
pay if they earn more than $20,700;
. implement a new Tax Free Savings (TFS)
scheme whereby interest income on all new
savings, up to a limit of $1,000 a year for single
taxpayers and $2,000 a year for married couples,
will attract a rebate of 30 cents in the dollar,
whatever their income;

provide additional tax credits for persons over 65

who earn up to $30,000. For those earning less
than $12,000 (single) and $14,500 (married), the
tax credits will effectively cover the full cost of
private health insurance which entitles access to
private beds and the doctor of choice;

increase Zone Rebates by at least 25 per cent;

implement a range of other changes affecting
personal tax such as a new superannuation tax
rebate and the abolition of the lump sum tax, a
new tax free personal savings scheme, a lower
and revised capital gains tax, and a reduced
fringe benefits tax.
4.2 Taxes On Business
The business sector will benefit directly from the tax
measures in the Liberal/National reform package.
Taxes on business will be cut by at least $20 billion.
Most importantly, we will:
abolish the $9.4 billion wholesale sales tax;
abolish the $5.8 billion payroll tax;
abolish the $6.6 billion excise on petroleum
products (about 55 per cent of which falls on
business);

Executive Summary

 abolish effectively all $3.3 billion of customs

duties;
rebate Goods and Services Tax paid on most
business inputs, including businesses competing
with imports;
reduce the tax on exports by $1.7 billion.
In addition, the Liberal and National Parties propose
to implement a range of other measures to reduce
cost disadvantages to the business sector:
our overall reform package dramatically lowers
many business costs by 20 to 50 per cent;
the revised and lower capital gains tax system
will permit greater access to rollover relief and
make additional allowance for goodwill;
the coal export duty will be abolished;
the training guarantee levy, which is in effect an
extra tax on employers, will be abolished;
the level of compulsory employer contributions
to employee superannuation, in place at the time
of the next election, will be retained but there
will be no further compulsory increases. Further
increases will be on the basis of choice and
incentive, rather than Labor's compulsion;
the present depreciation arrangements will be
reviewed to help Australian business to be able to
match best international practice;
company tax deductions for research and
development costs will continue from July 1993
at 125 percent, but we will ensure strict measures
to guard against abuse and we will promote new
R&D links between industry and universities;
the fringe benefits tax will be reduced
significantly and loop holes eliminated through
the alignment of the corporate and top personal
tax rate.
These tax changes are also to be seen against the
background of the other elements of our reform
agenda designed to reduce or eliminate major cost
disadvantages to business (e.g. on the waterfront, in
utilities, telecommunications, aviation, shipping,
land transport, development approval processes,
training and others).
As with other sectors, the business sector will be
expected to contribute to, as well as benefit from, the
reform process under a Liberal/National
Government. We are also committed to bringing the
corporate tax rate into alignment with the top
personal marginal tax rate at 42 per cent.
.

Executive Summary

4.3 Capital Gains Tax

The Liberal/National reform package will make
major changes to the capital gains tax system to
provide significant tax relief, incentive, and
retirement benefits for small business people,
farmers and small investors. We will do so in the
following ways.
capital gains tax will continue to apply, but at the
significantly lower marginal income tax rates, to
real capital gains on assets bought after 19
September 1985.
to reduce paperwork and simplify the system,
there will be an option to pay capital gains tax at
a flat rate of 30 per cent on nominal gains on
assets held for five years or longer.
capital gains of less than $3,000 made by an adult
individual in each year are to be exempt from tax.
relief from capital gains tax on the sale of
goodwill will be provided at the following rates:
50 per cent relief up to $500,000; 30 per cent
between $500,000 and $1,500,000; 10 per cent
between $1,500,000 and $2,000,000; and no
additional relief above that figure.
abolish capital gains tax on the sale of a business
by retirees aged 60 or more on gains up to the
value of ten times average annual earnings
(currently around $300,000) and indexed.
abolish capital gains tax on the sale of a business,
up to the value of ten times average annual
earnings, provided the funds are placed in an
Approved Deposit Fund until retirement.
full relief from capital gains tax will be provided
on the rollover of a business into a Iike business
where the disposal price does not exceed $5
million. This benefit will be available once every
five years.
the income tax free discount on shares issued to
or bought by employees through an employees'
share ownership scheme will be increased to
$500.
4.4 Indirect Tax
A Liberal/National Government will:
abolish the wholesale sales tax, Labor's hidden
consumption tax;
fund the abolition of State payroll taxes in a way
which will preserve the financial relativities
between the States;

 abolish petroleum product excise and introduce a

comprehensive national road funding policy;

4.6 Tax Administration

A Liberal/National Government will:

phase out customs duty by the Year 2000;

increase excise on tobacco by 25 per cent;
abolish the automatic indexation of excises.
We will also introduce a single rate 15 per cent
Goods and Services Tax. We will not increase the
rate beyond 15 per cent and will embody that
guarantee formally in legislation.
Some items will be "zero-rated" as far as the Goods
and Services Tax is concerned. These items are
health and education services, government provision
of non-commercial activities (including local
government rates), sale of a business as a "going
concern"; welfare, religious and charitable
institutions, and exports. Other items will be
exempt from the tax but input taxed. They are
residential rents and construction, other building
construction, financial services, gambling and
lotteries.
4.5 Compensation for the Goods and Services
Tax
A Liberal/National Government will compensate
Australians for the net one-off price effect of the
Goods and Services Tax package, estimated to
average 4.4 per cent of the Consumer Price Index as
follows:
Income Compensation
all pensions will be increased by eight per cent;
Age, Wives', Widows', War Widows', Sole
Parents', Service, Disability Support and
Carers' pensions;
other social security benefits will be increased by
six per cent;
income tax related benefits (sole parent rebates,
etc) will be increased by 4.8 per cent;
Wealth Compensation
Australians aged 60 years and over with taxable
incomes below $30,000, will be eligible for a
one-off wealth compensation rebate at the rate of
5 per cent, up to a limit of $2,500, on their
interest earning savings;
the question of extending wealth compensation
to shares will be reviewed by the Goods and
Services Tax Co-ordination and Planning Office.

appoint an internal Tax Office Ombudsman;

change the way in which the Tax Office is
administered by appointing a representative
Board of Directors;
modify the self-assessment process;
assess the present cost impact and extent of tax
compliance obligations and implement necessary
measures to minimise the burden;
establish a full-time Goods and Services Tax
Planning and Co-ordination Office with Sir
William Cole as its Chairman, assisted by the
Institute of Chartered Accountants in Australia.
4.7 Tax Avoidance and Evasion
The Liberal and National Parties' are committed to
lowering the overall taxation burden on Australians
and making the system fairer, thereby promoting
greater tax compliance.
Other specific measures include:
subjecting the black economy to a tax on
expenditure.
aligning the top personal income tax rate with the
corporate tax rate to remove the incentive for
individuals to incorporate purely for tax
avoidance reasons.
aligning the Fringe Benefits Tax rate with the
corporate tax rate.
changing the superannuation rules to lessen the
capacity for high income earners to use
superannuation as a tax shelter.
tightening the guidelines relating to the tax
deductibility of research and development
expenditure.
abolishing the wholesale sales tax, which by its
complexity is open to abuse, and replacing it with
the Goods. and Services Tax, which by design is
largely self-policing.
4.8 Expenditure Savings
We will make gross expenditure savings worth $10
billion (net $4 billion) in wasteful and unnecessary
government spending.

Executive Summary

4.9 National Savings Strategy

A Liberal/National Government's national savings
strategy will involve six separate but interconnected
initiatives:
a commitment to price stability to bolster saver
confidence;
a reform program to boost public sector savings;
incentives to save as a result of large cuts in
personal income-tax rates which are fully funded;
a broadly based goods and services tax helping to
shift the balance of taxation away from income
and towards consumption;
better targeted government welfare and
expenditure to encourage greater self reliance;
incentives for long-term savings built on a new
voluntary superannuation scheme, including a 25
per cent rebate to all individuals on the first
6,000 of contributions per year, abolition of tax
on lump sums and provision for individuals to
make tax rebatable contributions in respect of
their non-working spouse;
we will introduce a new system of Retirement
Savings Accounts (RSAs) to diversify the range
of financial institutions which can provide
savings and superannuation accounts;
incentives for shorter term savings built on a new
Tax Free Savings scheme;
this means at current interest rates over four
million married couples with children who have
taxable incomes of less than $50,000 will pay no
tax on the interest income for the first $25,000 of
new net savings;

Persons aged 65 or over with incomes less than

$12,000 (single) or $14,500 (married) who have
private health insurance will receive an
additional tax credit of $200 (single) and $400
(married), thus effectively covering the cost of
private health insurance.
High income earners who do not take out private
health insurance will be required to pay a
Medicare levy surcharge of $800 (family) and
$400 (single) per year.
Bulk billing will be retained for the over four
million pensioners, health care card holders and
disabled but will no longer be available to other
Australians.
Government monopoly on medical insurance
will be abolished and there will be provision for
gap insurance of medical bills.
4.11 World Class Schools, Universities and
Training
A Liberal/National Government is committed to
major reforms in the training and education areas
which will involve an additional $3 billion of
expenditure over the rest of this decade.
in addition to funding currently allocated to
government schools by the States and the
Commonwealth. We are committed to a range of
policies worth $154 million over the rest of the
decade to encourage parent choice of school in
the government sector, to lift literacy and
language skills, and to greatly expand
professional development opportunities for
teachers;
we will increase funding to TAFE by $520
million above current funding commitments to
the Year 2000;

a further one million single taxpayers earning

$50,000 or less need pay no tax on the interest
income from the first $12,500 of new net
savings.

we will commit $567 million to capital

improvement in the non-government schools
over the six years 1993-2000;

4.10 Health

we are committing $245 million for university

research to the Year 2000;

Medicare will be retained and significantly

improved as a system of universal health cover but
we will restore the balance between the public and
private sectors by encouraging individuals to
provide for their own health care by taking out
private health insurance.

education services will not be subject to the

Goods and Services Tax and the abolition of
other indirect taxes will result in lower costs for
the delivery of education services.
4.12 Assistance to Families

Those on incomes of less than $30,000 per year

will receive a Private Health Insurance Tax
Credit phased up to $400 (married) and $200
(single).

Executive Summary

A Liberal/National Government will implement a

range of measures to assist families:

Family Allowance will be doubled for families

with combined incomes below $30,000 per
annum:
families with combined incomes between
$30,000 and $40,000 will have their Family
Allowances increased by 50 per cent;
eligible families with combined incomes over
$40,000 will receive a six per cent increase in
their Family Allowances;
Family Allowance Supplement will be increased
by six per cent;
the Dependant Spouse Rebate (DSR) will be
increased by $300 per year for all eligible
families with children;

DSR for eligible families without children

will increase to $1,204;
the maximum DSR will be available for oneincome families with children where income
does not exceed $75,000 per year; oneincome families without children earning up
to $50,000 per. year will be eligible for the
DSR but will not receive the additional $300
per year;

we have allocated $90 million for increased child

care support;
sole parent pensions and additional allowances
will be increased by 6 per cent;
we have allocated increased funding of $50
million to voluntary/non-government agencies
some of which will be to the advantage of
families currently suffering from the effects of
financial and social hardship;
families will benefit from the health and
education reforms outlined in our reform
package;
families will also benefit from major cuts in
personal income tax, lower petrol costs, our
proposed changes to superannuation and our new
First Home Owners Scheme.
4.13 Assistance to Aged Pensioners, Retirees
and Low Income Earners
A Liberal/National Government will implement the
following measures to assist aged pensioners,
retirees and low income earners:
all taxpaying retirees to receive substantial
income tax cuts;

an increase in the tax free threshold from $5,400

to $7,000;
access to the new Tax Free Savings Scheme;
under our changes to the capital gains tax,
retirees and pensioners will not be taxed on gains
of $3,000 or less per year; sale of goodwill will
get tax relief; the sale of a business by retirees
aged 60 or more will be tax free up to a value ten
times average earnings (currently around
$300,000); and similar exemptions will apply to
a business, proceeds of which are placed in an
Approved Deposit Fund until retirement;
retirees and pensioners will benefit from the
significant fall in the price of petrol that will
result from our decision to abolish excise on
petroleum products;
they will also benefit from our decision to end
age discrimination and compulsory retirement.
More specific measures to compensate and assist
age and service pensioners and retirees include:
direct increases in age, service and all other
pensions by eight per cent to over 28 per cent of
average weekly earnings;
a GST Tax Credit - ensuring that all part
pensioners earning some additional income will
be fully compensated;
direct compensation for over-60s for the Goods
and Services Tax effect on savings - retirees with
taxable income up to $30,000 per annum will be
compensated for any one-off decrease in the
value of their savings;
health insurance tax credits of up to $400 per
single and $800 per low income pensioner
couples on up to $14,500 annual income - thus
effectively gives them basic private health cover
which will allow access to private bed and
private hospital and doctor of choice;
access to the pharmaceutical benefits concession
card for non-pension retirees -up to 500,000 aged
Australians will save up to $250 per year on
pharmaceutical expenses;
a deferred pension plan - pension increase for
those who defer their pension and remain in the
workforce;
simpler reporting arrangements - further
encouragement for pensioners to earn additional
income;
reform of the assets test - pensioners in genuine
need, particularly those in rural areas, will not be
unfairly treated under the pension income and
Executive Summary

assets test. allow the unemployed to be employed at training

wages which reflect the duration of their
unemployment. Employers would be required to
move to full minimum or voluntary enterprise
4.14 Assistance to Non-Age Pensioners and
wage levels within a specified time;
Welfare Beneficiaries
A Liberal/National Government will:
increase sole parent, invalid, wives, widows, war
widows, disability and carers' pensions by eight
per cent;
all other benefits and allowances, including
unemployment; sickness and special benefits,
education study allowances and a wide range of
training allowances will be increased by six per
cent.

allow people who have had nine months on JSA

to opt to work for the benefit for a period of six
months; and
provide a significant increase in the funds
available to voluntary community based
organisations for training.
4.16 First Home Owners Scheme
A Liberal/National Government will:

4.15 Genuine Assistance to the Unemployed

A Liberal/National Government will:
implement an integrated reform package that will
halve the unemployment rate by the end of the
decade;
progressively tighten the administration of the
Job Search Allowance (JSA) and end automatic
entitlement after nine months:
maintain the Special Benefit for persons
found to be in hardship situations who have
been actively looking for work while on JSA
on condition that they continue to satisfy the
ongoing hardship criteria and the same tighter
work test which applies in the final three
months of the JSA;
offer the unemployed earlier access to programs
which combine employment and training;
integrate Iabour market training programs into
mainstream training courses;
offer a range of positive workplace alternatives
for those genuinely unemployed after nine
months;
amalgamate the Commonwealth Employment
Service and the Department of Social Security;
devolve responsibility for administering
employment and training programs from
government agencies to Local Employment
Boards with Department of Social Security
officials, State or local government training
representatives and community and business
sector representatives;
create a steady flow of employment opportunities
for the longer term unemployed by introducing
AUSTRAIN - a special program which will
Executive Summary

provide an amount of $2,000 to first home buyers

earning up to $40,000 per year household
income, under the First Home Owners Scheme to
assist in the purchase of both new and established
dwellings;
* give superannuation funds permission to allow
those under the age of 35 to have access up to 75
per cent of their accumulated vested
superannuation benefit for the purpose of a
deposit or part deposit for their home. This will
be required to be repaid over a term of 25 years.
4.17 Infrastructure Reform
A Liberal./NationaI Government will:
reduce tariffs to negligible levels by the Year
2000 as part of our wide-ranging program of
infrastructure reform in conjunction with moving
to:
end the Waterside Workers' Federation
monopoly on the waterfront, introduce
enterprise agreements that will give
stevedoring companies the right to recruit and
manage their own workforce, privatise port
authorities and promote competition within
and between ports;
end the Australian monopoly on coastal
shipping, move to terminate the TransTasman Shipping Agreement and privatise
the Australian National Line (ANL);
abolish all fuel excise and remove taxes on
business inputs, thus reducing land transport
costs significantly and providing cost savings
to regional and rural air travel;
transfer responsibility for road funding and
charging to the National Road Transport

Commission with the Commonwealth to

retain responsibility for national highways;
re-examine the tax rules applying to large,
long-term infrastructure projects (e.g. the
Very Fast Train);
re-organise Australian National Railways on a
strictly commercial basis and ensure that the
National Rail Corporation achieves
reductions in rail costs;
accelerate the construction of the Third
Runway at Sydney Airport and facilitate the
development of the second international
airport in Sydney;
open the telecommunications market to full
competition and commence the privatisation
of Telecom;
pursue an "open skies" policy by allowing
Qantas and Air New Zealand to compete on
the domestic market, allow interlining by
international carriers on domestic routes,
encourage international charters to operate to
and from Australia, privatise the Federal
Airports Corporation and ensure that terminal
space is available on a competitive basis;

10

negotiate with the States to 'establish full

inter-State trade in electricity through the
establishment of a national power grid
(AUSELGRID);
review the tax system to ensure that
implementing best environmental practice is
not hindered by inflexible or outdated rules
and interpretations.
We will undertake a significant program of
privatisation including:
Qantas;
Commonwealth Bank;
Australian Mining Industry Development
Corporation;
Snowy Mountains Engineering Corporation;
Australian National Line;
The Pipeline Authority;
Commonwealth Serum Laboratories;
Australian and Overseas Telecommunications
Corporation;
Federal Airports Corporation;
Medibank Private.

Executive Summary

1. AUSTRALIA AT RISK

This document constitutes the most important and far-reaching reform program by any
Government or Opposition in Australia this century. It is based on nothing less than a new
role for government and a determination to restore the values which once made Australia the
world's most successful democratic nation.
Australia today is a nation at risk. The living standards of average Australians continue to fall.
The opportunities for our young people continue to shrink. And our social structures,
particularly the family, are under pressure from record unemployment and unprecedented
insecurity. The servicing of our massive international debt makes us one of the most
financially vulnerable nations in the world.
Unless we do something to turn our situation around, we will become the first generation in
Australian history to give our children a lower standard of living than our parents left us.
It's time for Australians to fight back. As a nation we can and must work our way out of our
difficulties.
There is no quick fix. But we can stabilise our national debt, and then reduce it. We can have
full employment once again, along with low interest rates and a rising standard of living.
Families can once more feel that there is solid reason for hope and confidence in the future.
We can have world class schools and universities and training systems that will prepare
people for challenging and productive employment. Our science and technology can be equal
to the world's best. We can successfully manage development and protection of the
environment to the satisfaction of the vast majority of Australians.
All these possibilities can be realised, but only if we have the courage to change.
The answer is in the hands of each and every Australian. National leadership can point the
way, but the solution lies with individual Australians themselves.
Government can determine a strategy, clear away obstacles, and provide equal laws and fair
opportunities for all. But Government must allow people to do what they do best. With
incentives and economic freedom restored and their talents liberated, Australians can do the
job.

Fightback! - Its Your Australia

11

2. THE ROOTS OF NATIONAL DECLINE

At the time of Federation in 1901, we were, on a per
capita basis, the richest country in the world. Now,
we don't even make the first eleven.
The Depression of the 1890s with its bank failures
and great strikes made a deep impact on those who
founded our Federation. They were determined that
the economic and social turmoil of that decade
would never again be inflicted on Australians. The
leaders of the new Commonwealth saw the
introduction of tariff protection and industrial
arbitration, supplemented after the First World War
by a wide range of rural subsidies as the best means
of ensuring Australia's economic prosperity and
social harmony.
Tariff protection was meant to ensure that
companies could afford to pay a "just" wage while
industrial arbitration was meant to guarantee that
they did so. But whether it was tariff protection,
industrial arbitration or even the White Australia
policy, the fundamental directions laid down in
those early years reinforced, rather than broke down,
Australia's isolation from the rest of the world.
For many years, the Australian system of
"protection all round" made us feel superior. We
didn't know then what is glaringly apparent now:
that it was inculcating a low productivity and
inward-looking culture and steadily eroding the
basis of our prosperity.
To some extent, therefore, the Hawke Government
has been a prisoner of our history. Yet it has missed
its chance to make history, to break the mould of
Australia's sleepy industrial and commercial
culture. The Hawke Government cannot be blamed
for its inheritance - but it can be blamed for not
seriously tackling problems which have become
blindingly obvious in the past decade.
By 1960, according to OECD figures for GNP per
head of population, Australia had declined to fifth
place behind the United States, Canada, Sweden and
Luxembourg. Three decades later, we had been
overtaken by Switzerland, Japan, Germany, Finland,
Norway, Iceland, Denmark, Austria, France and
Belgium falling to just 15th place amongst industrial
countries.
The economic comparisons with our own region
provide an even starker illustration of our economic
decline.
Throughout the Asia Pacific region, real GDP
growth from 1980 to 1990 averaged 8.6 per cent
every year. The economies of Japan, Indonesia,
South Korea, Malaysia, the Philippines, Singapore,
Thailand, China, Hong Kong and Taiwan on average
12

are two and quarter times larger than they were just
10 years ago. By contrast, Australia's GDP growth
averaged just 3.5 per cent and we are only 40 per
cent larger now than we were (and we have 16 per
cent more people).
Between 1980 and 1990, while other regional
countries' share of world output rose from 16.3 per
cent to 22.5 per cent, Australia's share rose from 1.4
per cent to just 1.5 per cent.
As a trading nation, Australia's ranking (in terms of
our share of exports) has fallen from 13th in 1961 to
19th in 1989. By contrast, South Korea's world
export trade ranking has rocketed from 99th to 13th
over the same period. Moreover, although
merchandise exports as a proportion of our total
exports have increased, a sophisticated economy of
our size should export roughly double our
percentage of merchandise.
The comparisons with our economic competitors
show that the relative position of the Australian
economy is being eroded, that its competitiveness
has declined and that its outlook for the future under
current policies gives little hope of change.
We should not begrudge others their success which,
after all, explains why our tourist destinations are
attracting more visitors. But we need to look at our
own relative failures. We have never wanted to be a
British farm. We have never wanted to be an
American mine. We don't want to be a giant
Japanese hotel. Our children, the children of the
Lucky Country - those lucky enough to have jobs don't want to become a nation of bellhops and
shoeshines. We want to be a diversified, dynamic
economy with a shared sense of national identity.
We have always had the potential to do more but
Australia's history, for the best part of a century, is a
chronicle of missed chances.
The essence of our economic problem is that,
compared to the rest of the world, we don't save
enough and we don't produce enough. Since 1900,
we have become considerably richer but other
countries have become much richer, much faster.
We cannot measure our success by beating our own
past performance; we need to beat the current
competition. And since 1983, while Australia has
continued to grow richer, middle Australia has
become poorer, not just relatively but absolutely.

Labor's Human Misery

While the rich have become more rich and the poor
have become less poor, the living standards of those
people on whom the future of this country depends,
Fightback! - It's your Australia

Middle Australia, has been squeezed under the

pressures of inflation, taxation and unemployment.
Since 1983, PAYE employees, those whose interests
Labor was formed to protect, have become much
worse-off while the "capitalists" Labor used to
despise have done well from interest, dividend and
capital gains.
Since February 1983, real average weekly earnings
have declined by nearly five per cent which
constitutes a sustained fall in real wages
unprecedented since the Great Depression. The
Government's "social wage" is a codeword for
bigger and more intrusive government substituted
for cash in the pocket. Middle Australia is the real
loser of the Hawke Government's policies, as the
following page charts show.
Department of Social Security research, which
counts disposable income as average weekly
earnings plus rebates and family allowances less tax
and the Medicare levy, presents a stark picture of
how Middle Australia has suffered.
A single income couple with two children on
average weekly earnings is nearly five per cent
worse off over the life of the Hawke
Government.
A two income couple with two children on twice
average weekly earnings is nearly three per cent
worse off.

A single income couple with four children on

twice average weekly earnings is more than six
per cent worse off.
Those on $19,000 a year or less are generally better
off, as are those on $150,000 a year or more. But
most people earning between these extremes are
significantly worse-off. There has been a massive
redirection of income away from the great majority
of the families of Australia.
The bottom line, after all the Government's rhetoric
and "compassion", is that the real money in the
pockets of the typical Australian family is now $20 a
week less than under the Fraser Government.
The figures cited above do not take housing costs
into account. The inclusion of housing costs reveals
an even grimmer predicament.
In March 1983, a single income couple with two
children under 13 on average weekly earnings had
$264 a week disposable income. Home loan
repayments then averaged $81 a week leaving $163
(or 62 per cent of after tax income) in the pockets of
an average family.
In June 1991, the same family had $432 a week
disposable income but home loan repayments
averaged $217 a week. An average family - if it was
still able to support an average home loan - had just
$215 (or under 50 per cent of after tax income) in its

HAWKE'S WINNERS AND LOSERS

CHART

Real Disposable Income 1983-91

. Single Income Couple
Two Children

2.1A

10

per cent change

8
6
4
2

2
-4
-6
-8
75%

100%

150%

200%

300%

400%

600%

per cent of AWE

Source:Harding & Landt: Dept Social Sec

Fightback! - . It's your Australia

13

pocket after mortgage payments. After inflation,

such a family is actually $65 a week or more than 20
per cent worse off.
In 1983, the average Australian home cost $62,000
which was four times average annual earnings.
Today, the average home costs $139,000 which is
5.5 years' average earnings. The home loan
affordability index has leapt from 19.3 to 32.5 over
the period which means that a combination of high
prices and high interest rates has put buying a home
beyond the reach of average wage earners.
In March 1983, a Holden Commodore cost $10,952
which was 37 weeks' average earnings. Today, a
Commodore costs $23,592 which is 49 weeks'
average earnings.
In 1984, when basic family private health cover cost
$6.33 a week, the average family spent about $17 a
week on health and education, or under five per cent
of total income. Now that basic private insurance
costs $15 a week, the average family spends more
than $33 a week on health and education, or nearly
six per cent of total income.
For average Australians, the accepted ingredients of
a secure life are slipping out of reach. For growing
numbers of Australians, the essence of personal
security, a job, has been plucked away.

How Labor's Policy has Failed Unemployment

This financial disaster for Middle Australia is now
compounded by the highest level of job insecurity
for sixty years.
The official unemployment rate, currently over 10
per cent, masks an even greater problem of lack of
work. The official figures, which regard as
employed anyone who has worked for even one hour
in the past month, hide the extent of underemployment in our society. Adding those who are
working short time, plus those who cannot convert
part-time into full-time work to those officially
unemployed, shows that the total under-employment
rate is nearly 16 per cent, as the chart over the page
illustrates. In other words, nearly 1.5 million people
cannot obtain the work they need.
Among our youth, our hope for a better future,
unemployment now hovers at about 30 per cent.
Unemployment is no longer something that happens
"but there". It is the real experience of growing
numbers of Australian families.
The latest statistics reveal that 226,000 are
unemployed from families where no-one has a job,
which is an increase of 41 per cent in 12 months;
193,000 Australian children live in homes where noone has a job, which is an increase of 40 per cent in
12 months; 566,000 people have now been

CHART
2.1B

Change In Real Disposable Income 1983-91

Double Income Household (split 60%-40%)
- Two Children
per cent change

0
4

2
4

-6
8
75%

100%

150%

200%

300%

400%

600%

per cent of AWE

source:Harding and Landt:Dept Social Sec

14

Fightback! - Its your Australia

UNEMPLOYMENT SETTING NEW RECORDS

CHART
2.2

UNEMPLOYMENT AND UNDEREMPLOYMENT

PER CENT OF WORKFORCE
18
16
14
12
10

4
2
6

I lb

ib

db

UNEMPLOYMENT RATE

ih'

iib

db

hb

UNDEREMPLOYMENT RATE - TOTAL RATE

NOT SEASONALLY ADJUSTED

unemployed for more than three months, which is an

increase of 70 per cent in 12 months; and 219,000
have been unemployed for more than a year, which
is an increase of 74 per cent in just 12 months. One
year ago, the median duration of unemployment was
13 weeks. Now, it is 26 weeks.
No wonder that the latest Roy Morgan research
shows that 28 per cent of Australians fear losing
their job and 53 per cent fear not being able to find
another one. Yet this is hardly the fault of laziness.
The same survey showed that 76 per cent of
Australians would worker harder for the same pay
and conditions, if only the Government would give
them the opportunity.

For seven years, the Government pumped money

into the economy which grew too fast for our
productive capacity. Policy-induced demand
exceeded production by a sizeable margin and
spilled over into imports. The result has been a
current account deficit averaging 4.8 per cent of
GDP since 1983 compared to 2.5 per cent of GDP
over the previous two decades, which basically
means that for every $100 we've earned, we've
spent $105 and borrowed the difference. Over eight
years, this amounts to a cumulative borrowing of
$57 but we still earn only $100 a year. Unless we
dramatically increase our export performance the
debt trap will rapidly consume us.

The fact that unemployment is setting new records

means that, in Labor's centenary year, Bob Hawke
and his colleagues can hardly call themselves a
Labor Government. Deputy Prime Minister Brian
Howe's recent admission that there is now a class of
"new poor" constitutes a stunning confession of
failure.

To finance these escalating deficits, Australia's

gross foreign debt had exploded to a massive 61 per
cent of GDP by 1989, which put us well ahead of the
international debt champions, Brazil and Mexico, in
terms of total debt, per capita debt and even debt as a
percentage of GDP. As a result, our credit rating
with overseas agencies, our badge of financial
integrity, has been down-graded twice.

None of this came about by accident or because of

the actions of other countries. The current crisis is
not the result of great forces beyond Government
control. Australia's gravest economic crisis since
the Great Depression is essentially the result of a
deliberate policy consistently pursued over the entire
life of the Hawke Government.

This means that we must pay a risk premium on our

overseas borrowings and our existing debt burden is
even harder to service. If this process continues, the
price of further access to borrowings will be
International Monetary Fund dictation of
Government fiscal and monetary policy. Foreign
debt, in other words, threatens to take control of
Australia out of Australian hands.

Fightback! - Its your Australia

15

In order to eliminate our $15 billion current account

deficit, just to keep our debt from growing further,
we need additional exports equivalent to the exports
of another entire mining industry, or five wool
industries, or seven wheat industries.

wages high penalises the weak because it drives their

companies out of business. But setting wages Iow
penalises those who are getting on with the job
because it prevents them from attaining their just
reward.

Put another way, each one of the 1.6 million jobs

created between March 1983 and the start of the
current recession cost about $70,000 in new foreign
debt. We are rapidly losing the jobs, but we still
have the debt which our children and grandchildren
will have to repay.

Because unions have demanded, and received, wage

rises that are quite unrelated to the performance of
individual workers and the profitability of individual
enterprises, wage increases unmatched by
productivity increases have led to even higher
prices. The result is a low productivity/high
inflation spiral reminiscent of a Third World
economy.

This is Labor's legacy - a host of unreal jobs which

we could not afford and could not sustain, as the
recession is now demonstrating. The unsustainably
high price of those jobs guaranteed the inevitability,
sooner or later, of a severe slump, which is the
recession we now endure.
All this means that Australia is now in the
internationally recognised danger zone for debt
servicing of about 25 per cent of export earnings and
is close to the levels experienced in our worst
economic crises. Moreover, our debt servicing
burden could balloon if the dollar declines to its long
term competitive level.
Our household savings ratio, which averaged over
12 per cent throughout the 70s, has averaged just
over seven per cent for the life of the Hawke
Government (and has just fallen to 4.3 per cent
which is the worst quarterly result since records
were kept) - while credit growth often exceeded 20
per cent a year.
Company savings are now at their lowest level in
over 25 years and public sector dissaving is
increasing at an alarming level.
This helps to explain how our national investment
exceeded national savings by a massive five per cent
during the 1980s (compared with only two and a half
per cent during the 1960s). But whereas we have the
great mines of the Pilbara and the Bass Strait oil
fields to show for our earlier overseas borrowings,
the most tangible evidence of the 1980s spending
spree is a nest of shiny but empty office towers.
We could not continue to live as we did during the
1980s. Labor's inflationary boom and speculative
bubble had to burst.

Why Labor's Policy has Failed The Accord

The Government's deal with the ACTU, the socalled Wages Accord, is at the heart of our structural
problems and amounts to a virtual conspiracy
against jobs.
Paying the same wage increase to everyone,
regardless of workers' efforts and companies'
profitability, is actually a grave injustice. Setting
16

For most of its period in office, the Government has

tolerated high rates of inflation because it has given
workers the illusion of prosperity without the
necessity for changes to work practices. Why would
workers lift their game, if they were all to receive the
same percentage wage increase regardless of
collective productivity or individual effort?
As a result, Australia has been a consistent
economic under-performer. Our growth has been
erratic. Until the slump, our inflation has been
unacceptably high. And our productivity
performance has been generally poor.
TABLE 2.1
AUSTRALIA'S POOR PRODUCTIVITY
Labour productivity growth (% pa) 1983-90,
selected countries
Japan
France
Italy
Germany
Canada
USA
UK
Australia
Source: OECD database

3.4
2.3
2.3
1.7
1.3
1.2
1.1
0.9

Throughout the decade Australian productivity

growth has lagged well behind that of the Big Seven
industrial countries which helps to explain why
nearly every other major country has increased its
relative wealth faster than Australia over the past
decade.
The Accord is at the heart of our structural problems
and has exacerbated our immediate macroeconomic
difficulties. Wage increases consistently ahead of
productivity increases have kept inflation high and
explain why a deep recession with mass
unemployment has been the only way the
Government could get inflation down.
The Accord was supposed to keep wage costs down
to boost growth and jobs. It did restrain wage costs but not as much as it undermined productivity
growth. The result was unbalanced, unsustainable
growth leading to an inevitable crash. The Accord
Fightback! - Its your Australia

has become a massive economic and political failure

because it has kept wages down yet, in the end, left
us with very high unemployment.
Because the Accord locked in high Government
spending but locked out genuine microeconomic
reform, Labor has been left with monetary policy,
interest rates as its main tool of economic
management - which even the ex Treasurer realised
was a blunt instrument.
Yet each trend shift in interest rates had unintended
ri sing
dollar torpedoed Paul Keating's boasted "J curve"
rise in exports. In 1988, easy money exposed our
structural problems and the limits to our balance-ofpayments-crisis-free growth. In 1990, sustained
and dangerous consequences. In 1987, a

record interest rates precipitated the recession the

Government said we would never, ever have.

Each change in policy has been designed to solve
yesterday's problem and has ended up creating
tomorrow's mess. Meanwhile, Australia's
predicament has gone from bad to worse.

Why Labor's Policy has Failed - Tax

The tax system is a key dimension of Australia's
structural problem. Since 1983, even after inflation,
the Federal Government's total tax take has
increased by 34 per cent. Personal income tax has
increased by 30 per cent, company tax by 74 per

CHART

cent, wholesale sales tax by 60 per cent and fuel

excise by 189 per cent.
TABLE 2.2
TAXABLE INDIVIDUALS IN 1989-90
Income

Marginal

Proportion of

Cumulative

Tax

Rate

Taxpayers in

proportion in

Bracket

(a)

Each Bracket

Each Bracket

$0-$5400

0.6

$ 5401 -$20000

20

48.5

49.10

$20001 - $36000

38

34.3

83.40

$36001 -$50000 46

11.6

95.00

5.0

10000

$50001 +

47

.6

100.0

(Source: Income Tax Statis ti cs 1989-90 Income Year)

(a) the income tax brackets do not correspond exactly with the
grades of taxable income provided in the statistics so the
allocation is approximate.

In 1982/83, the marginal tax rate for a male on

average weekly earnings was only 30 per cent.
Now, with the Medicare Levy included, it is 39.25
per cent. More than half of all taxpayers face a
marginal rate of 38 per cent or higher and nearly one
fifth face a margin al tax rate of 46 per cent.
Moreover, the top marginal rate now applies to an
income only 1.25 times average male earnings compared to a multiple of 1.9 only two years ago,
2.8 in 1977, 8.4 in 1969 and almost 19 in 1950. If
the top rate still applied at 1950 levels, it would
apply only to people earning over $475,000 a year!

AUSTRALIA'S DEBT CRISIS

2.3

AUSTRALIA'S NET EXTERNAL DEBT 1960-1991

( PERCENTAGE OF GROSS DOMESTJC PRODUCT)
Net debt % GDP

40
35
30
25
20
15
10
5
0 iiuv nnv ^uv nv niv nvt y ivvv cv nvvi

1960

1965

nnv nvv nnv ivvv nvv ntiv K v ivivi kuq

1970

1975

kyy nyt Oay Y'I I

1960

yy

Y 15111 k

1985

ntyy kV,V 'St ruyi

1990

OECD data

Fightbackl - It's your Australia

17

Of course, today's top rate of 47 per cent (plus 1.25

per cent Medicare Levy) is considerably lower than
the 65 per cent rate of 1950. Nevertheless, the
income tax paid by average weekly earners has risen
from eight per cent of total income in 1950, to 11 per
cent in 1960, 19 per cent in 1971, and 23 per cent in
1982 to peak at about 26 per cent in 1988.

Because the wholesale sales tax taxes business

inputs it "cascades" through to goods .which are not
formally subject to tax. For instance, of the existing
consumption taxes, WST alone adds an estimated
7.4 per cent to housing costs, 3.3 per cent to food
costs and 1.3 per cent to medical costs, even though
it does not directly fall on any medical items.

Access Economics estimates that bracket creep, the

process whereby inflation pushes taxpayers into
higher tax brackets and subjects the same real
income to hidden extra tax, has reaped the Hawke
Government a cumulative tax windfall of $22
billion.

Wholesale sales tax alone, which the Hawke

Government has increased from about $3 billion to
over $9 billion, amounts to a consumption tax of
aboutfour per cent on the average family, which can
add up to $20 to their weekly shopping bill.

High marginal rates have discouraged work, saving

and investment - and also increased the incentive to
avoid tax. At the same time, increasing tax
complexity has increased the opportunity to avoid
tax. The Hawke Government has added 18,000
pages to income tax rules which are difficult, if not
impossible, even for experts to understand - which
helps to explain why taxpayers have lodged more
than 1.5 million objections to tax assessments over
the life of the Hawke Government.
In addition, very favourable treatment for
superannuation and lower rates of company tax have
provided high income earners with plentiful
opportunities to avoid tax. Under the Hawke
Government, paying tax has still been only an option
for the rich.
An internal Tax Office report suggests that claims
for unsubstantiated tax deductions have soared since
the introduction of self-assessment. Tax debts as
large as $50,000 are not being pursued. In addition,
the report concludes, existing tax procedures "do not
take account of the true tax avoider, the one we do
not know about at all".
Assessing the size of the undeclared, or "black",
economy is, almost by definition, trying to measure
the immeasurable. However, estimates in the 1985
Tax White Paper are consistent with academic
studies which put the black economy at 10 per cent
of recorded GDP.
Hard evidence is likely to be only the tip of the black
economy iceberg. In its 1990-91 Annual Report, the
Reserve Bank noted a strong growth in demand for
one hundred dollar and fifty dollar notes. Recent
testimony to the Building Industry Royal
Commission in Sydney suggests that the black
economy is rampant in that industry. In one case,
union officials demanded that a $5000 payout to one
worker be "worked through the books" to avoid tax.
In another, a builder kept "bodgie" books to hide the
fact that his labourers were getting $575 a week "in
the hand" plus up to $150 cash-in-hand for Saturday
work.
In addition, the Government has added greatly to the
burden and complexity of wholesale sales tax, which
now comprises aspects of more than 30 separate
pieces of legislation.
18

Government-imposed tariffs, quotas and bounties

are another hidden consumption tax which, the
Industry Commission says, added 3.8 per cent (or
about $16 a week) to household expenditure in
1988-89. Existing tariffs on textiles, clothing and
footwear, for instance, are the price equivalent of a
35 per cent consumption tax.
In March 1983, Federal petrol tax was just 9 cents a
litre, which added just $3.50 to the average family's
weekly fuel bill. Today petrol tax is 26 cents a litre,
which adds over $10 to the average family's weekly
fuel bill.
In total, the Government's existing consumption
taxes - wholesale sales tax, tariffs and fuel excise can cost the average family about $45 a week.
Everyone knows about income tax which is why
Labor Governments must pretend to keep income
tax levels down. But only the experts know about
the Government's existing hidden taxes which have
provided this Government with the tax bonanza that
has kept Big Brother alive and well.

Why Labor's Policy has Failed - Welfare

Ironically, high welfare spending is another
important factor in our decline. Adjusted for
inflation, welfare spending has risen by nearly four
per cent every year throughout the life of the Hawke
Government and is the fastest growing area of
Budget outlays - up from 28 per cent of Federal
Government spending in 1982-83 to 34 per cent in
the current Budget. Welfare spending now
consumes $30 billion every year, with about $1
billion just to administer the welfare budget. In
other words, just administering welfare amounts to
the cost of building a new Parliament House in
Canberra every year.
Australians in work are now paying about $70 a
month (or over $800 a year) just to support the army
of jobless while total welfare payments are the
equivalent of about 80 per cent of total PAYE
income tax receipts. In other words, an average
wage earner is paying about $3500 a year to support
other peoples' families before he can begin to
support his own.

Fightback! - It's your Australia

Australians are living with the consequences of a

welfare explosion that began under the Whitlam
Labor Government.
Since 1970, the number of Australians living
primarily on government benefits (that is, age,
supporting parent or invalid pension plus sickness,
unemployment or special benefit) have risen from
one million to 2.7 million or from 8 to 16 per cent of
total population.
Excluding family allowance beneficiaries, the
percentage on welfare has risen from 19 per cent to
34 per cent of the workforce. In other words, in.
1970, 5 workers supported 1 welfare dependent.
Today, 20 workers support 7 welfare dependents.
The fact that about one Australian in three receives
some form of government benefit points not to the
generosity of the system but to the fact that too many
people receive welfare. This is unfair to the general
community which is entitled to expect value from its
welfare dollar. It is unfair to the genuinely needy
who would otherwise gain more of the welfare
budget. And it is unfair to those who should not be
on welfare but who are encouraged to develop a
culture of dependency.
By all the usual measures, more welfare has not
meant a contented society. Divorce, suicide and
crime have risen exponentially in the past two
decades. Last year, Australians were two and a half
times more likely to pass through the divorce courts
than in 1971. In particular, serious assault per capita
has risen by 288 per cent since 1973. In the same
period, robbery per capita has risen by 74 per cent,
breaking and entering by 52 percent and fraud by 95
per cent.
Moreover, despite all the efforts to target welfare,
the system can still be abused. The latest Auditor
General's report claims, for instance, that
Department of Social Security and Commonwealth
Employment Service staff have not achieved
planned savings by enforcing the work test for
unemployment beneficiaries. It is this kind of
failure which helps to breed the culture of
dependence which is so hard to break and so socially
divisive.
The minimum award wage is a little over $300 a
week. Yet an unemployed person, married with two
secondary school age children, receives $329 a week
in benefits. Higher wages for unskilled jobs would
send even more of our companies broke and price
more of our workforce out of a job.

decisions and are now increasingly looking to

Government for help whenever they are in trouble.
And everyone tends to think that money really does
grow on trees.
There are really two classes of Australian business.
There are those twenty per cent of businesses which
operate effectively on world markets, which are
driven by the need to match best international
practice and which have learned the hard way that
nothing comes free. There are the other 80 per cent
of businesses which operate predominantly in our
domestic market; which are dominated by
Government and union control, influence and
direction; which are riddled by restrictive work
practices; in which competition can be quite
artificial; and in which prices are often related more
to union rules, government regulation and a raft of
special interests, than individual business decisions
in a competitive market.
The tragedy is that the eighty per cent is starting to
choke the twenty per cent with massive cost
disadvantages and inefficiencies.
Our world class farmers and miners can't get their
products past the Waterside Workers' Federation.
They have to pay award wages and loadings
regardless of the state of their world markets and
they can't get overseas customers to pay a surcharge
for the inefficiencies of our railways,
telecommunications, waterfront and so on.
For the best part of a century, Australia's efficient
exporters have been subsidising grossly inefficient
domestic producers. We can no longer ride on the
back of our sheep, our coal trucks and our iron ore
transports because our overseas competitors have
lifted their game while the Australian Government
has dropped its game.
Three years ago, the annual World Competitiveness
Report published by the World Economic Forum
and the Lausanne Business School ranked Australia
10th out of 23 industrial countries as a place to do
business. In the latest report we have slumped to
16th place.
In the past two years, this Government has added the
superannuation tax and the training tax to otherwise
record levels of tax and unprecedented union
interference in the rights of management - as if
business were an inexhaustible supply of funds for
Government schemes and opportunity for union
influence.

Why Labor's Policy has Failed - Business

It has tied up development with green and black tape

- as if Australia could afford to be absurdly fussy
about the development it wants.

Australian attitudes to business constitute a cultural

failure of alarming proportions. The Government
regards business a milch cow - both for tax revenue
and for wage deals. But Australian companies, for
their part, let Government make too many of their

And it has inflicted on the private economy the

recession only Government had to have. All this
spells the jobs crisis that is the recession's most
painful legacy.

Fightback! - It's your Australia

19

The Government's sustained record real interest

rates constitute a massive burden on business. The
Australian Manufacturing Council estimated last
year that Australia's real cost of corporate debt
averaged 6.5 per cent (compared to five per cent in
the UK, 4.5 per cent in the USA and 3.5 per cent in
Germany and Japan) - which is one reason why so
many Australian companies are choosing to invest
overseas.
The Metal Trades Industry Association estimates
that direct government imposts now consume 7.4
per cent of business operating expenses and amount
to about 280 per cent of total business profits.
Customs duty, payroll tax, wholesale sales tax and
most of government's various petrol levies - in the
first instance - fall directly on business.
Not surprisingly, investment is projected to fall in
the current financial year to the lowest level since
records were kept. Meanwhile, bankruptcies are
setting new records - running at more than twice the
rate of the 1983 recession and three times the rate of
the 1961 recession.
Early in its term, the Government genuflected to
market reality by allowing the Australian dollar to
float and foreign banks to establish offices here. But
for most of its term, the Government has inflicted on
business a deal-based, mate-driven culture perfected
in the smoky back rooms of NSW Labor politics.
Vital business and investment decisions have been
made on the basis of "mateship" and polling a few
marginal seats in Sydney and Melbourne.
Senior members of the Government know that we
can only justify higher living standards than our
neighbours if we continue to produce more and of
higher quality than our neighbours. Yet the
Government has persistently shirked the reforms
needed to boost productivity, retain our competitive
edge and guarantee our prosperity.
In particular, the Accord has taken industrial
relations out of the hands of management and into
those of the ACTU and industrial bureaucrats. This
substantial inability to manage their workforce is a
key explanation of - our firms' low labour
productivity, the resultant reluctance to invest in
manufacturing and the flight of some important
business off-shore.
The Accord has prejudiced the outcome of some
positive policies. The Government's tariff reforms
have needlessly thrown people out of work because
they have not been accompanied by greater labour
market flexibility and the reform of public sector
utilities. Hence, one of the few real achievements of
the past decade, is clouded in unnecessary
controversy.
Labor has just cut tariffs. What we need are policies
which integrate tariff reform with a much more
flexible and productive domestic market. We can
20

continue to lose industries and shed jobs under

Labor's policies. Or we can adopt a substantially
new way of doing business.

Why Labor's Policy has Failed Education and Training

Standards of education and training in Australia are
another factor in our decline and loss of international
competitiveness.
Education is a key indicator of a society's health and
vigour. The money we invest in education and the
care we lavish upon the next generation is really
society's vote of confidence in itself and its future.
Education and training at international standards are
essential if Australians are to have the knowledge
and skills to survive in international competition.
Raising the standards of Australian education and
training is a national imperative for this decade.
In education, as elsewhere, Labor has tried to make
the world fit its ideological preconceptions rather
than the other way around. It has resisted any proper
monitoring of standards preferring the rhetoric of the
clever country to the reality. The reality is that this
Government spends too little on the education and
training of young Australians, wastes too much of
what it spends and allows teacher unions to dictate
too much of what is taught.
The most recent comparative data shows that
government spending in Australia on education and
training is well behind that of major industrial
countries (see Table 2.3).
TABLE 2.3
PUBLIC EXPENDITURE ON EDUCATION PER
HEAD OF SCHOOL AND UNIVERSITY AGE
POPULATION - SELECTED OECD COUNTRIES
1987
(US DOLLARS)

Canada
Germany
United States
France
Japan
United Kingdom
Italy
Australia

3798
3058
2704
2472
2314
2085
1886
1754

(Source: OECD)

As a nation we have been prepared to make a greater

private commitment to education than other
countries. While additional government spending
is, we believe, more than justified, the key point is to
make sure that total education spending - public and
private - is adequate to provide Australians with
world class teaching and research.

Fightback! - It's your Australia

Spending is by no means the only issue. Equally

important is making sure that our educational
institutions are efficient and responsive to those
whom they serve. There are serious structural issues
to be addressed in Australian education. Industrial
relations reform must be very much on the agenda
and there should be an increasing emphasis on
paying parents and students rather than institutions.

differences between institutions in a false and

arbitrary uniformity.

Australians are failing behind in the intellectual prerequisites of an advanced nation. Over one million
Australians lack sufficient literacy and numeracy to
function in the workplace.

Education has been a key victim of Labor's Accord

with the ACTU. Confrontation and over-regulation
damage all sections of society but are especially out
of place in communities of scholars driven by the
desire to expand and impart knowledge.

The "good" news, in science education at least, is

that our students are as knowledgeable now as they
were in 1970. The bad news is that the students of
other countries have lifted their standards and we are
falling badly behind.
In training and skills development Australia is
arguably at "the back of the pack" among industrial
countries.
Except for Greece, Australia has the OECD's lowest
proportion of students in vocational training (see
Chart 2.4)
The Government's higher education "reforms"
(which abolished the distinction between
universities and colleges of advanced education)
were driven by an academic version of the "tall
poppy" syndrome and submerged the vast

The result is that so many academics are heading for

better paid jobs overseas - and academic life has
become so unattractive - that Australia faces a
shortage of up to 20,000 qualified academic staff by
the end of the decade.

The over-regulation of the universities has not only

robbed institutions of their autonomy, but resulted in
severe overcrowding. In 1991, for instance, 30,000
qualified students were shut out of the universities
because the Government would not allow
institutions to admit them.
Education has been a particular victim of Labor's
levelling-down mentality and pre-occupation with
equality of outcomes rather than opportunity. That
form of elitism which always seeks further and tries
harder should be at the very core of any educational
institution. Instead, Labor's teacher union allies
continue to fight against external exams and skills
testing while advocating fringe subjects based on
ideological correctness.

CHART
2.4

PER CENT OF POST-COMPULSORY

STUDENTS IN VOCATIONAL PROGRAMS
100

80

60

40

20

0
OST GER SW] SE ITA DEN ERA NET NOR BEL FIN SPA UK IRE JAP TUR NZ USA AUS GRE
Source: OECD data

Fightbackl - It's your Australia

21

In education, as in so much else, Labor has exalted

the administrator and diminished the actual
provider. A "Canberra-knows-best" mentality has
flourished so that schools and universities waste vast
energies assuring head office that everything is
happening by the book. Melbourne University, for
instance, had to spend $100,000 to provide Canberra
with a 9 kg "research profile" submission.
In education, more than in most other fields, Labor's
Big Brother instinct has had full rein with a system
of school funding which allows the Federal
Minister, rather than interested parents, to set the
agenda for the establishment of new schools.

Conclusion
Over more than eight years, the Hawke Government
has shown that its instinct is to protect the interests
of government over people and bureaucracies over
individuals. And by giving the trade union bosses a
virtual veto over policy, the Hawke Government has
given up the quest for real social and economic
reform.
The best way for people to have a better life is to
build a dynamic economy where everyone who
wants work can get a job and our resources are put to
their best use. And the only way to produce a sound
economy is to tackle our underlying structural
weakness - the low productivity wage culture,
incentive-sapping tax structure and welfare

22

mentality which add up to a decreasing capacity to

compete in the world.
Labor's real failure is that in eight years of
government it has failed to address longstanding
structural problems and instead it has created a range
of new ones. Without a change of direction,
Australia faces the prospect of continued structural
failure, more pressure on living standards, more
dependence on government and more government
spending on borrowed money - the very banana
republic future Paul Keating predicted five years
ago.
Having given us the recession "we had to have",
Labor is incapable of giving us the reforms we need.
Labor has turned its back on the only way out of our
predicament. It won't make the reforms needed to
restore incentive and increase national production,
such as reforms in the labour market, in taxation and
in private sector incentives because the ACTU, its
own factional power brokers and its favoured
interest groups just say "no".
Change is no longer an option. Australia will
change. The only question is whether we make the
changes now ourselves, or have outsiders sooner or
later force them upon us much more painfully.
We can and must fight back!

Fightback! - It's your Australia

3. INDIVIDUAL VALUES & NATIONAL GOALS

Shortly after the 1990 election, the Liberal and

National Parties sought the views of Party members,
community leaders and concerned citizens about
what's right and what's wrong with our country and
what our future direction should be.

action of government. Australian business - mostly

small business - can certainly provide jobs as long as
it is not undermined by ruinous interest rates, payroll
tax, training tax, superannuation tax, industrial rorts
and endless paperwork.

Australia 2000 - The People's Verdict

The whole purpose of this great reform program is to

give individual Australians the chance to fight back
for a better life. It is then up to each Australian to
make the most of it. This reform program will put
Government in its place and put Australians back in
control of their own lives.

What emerged from that process, and in particular,

from the Australian 2000 project, is that Australians
are united on the need for change, divided on what
that change should be and pessimistic about whether
change will make much lasting improvement.
Australians know what they don't want. They don't
like big government, big unions and big
bureaucracy. They don't want falling living
standards and declining international standing. But
our respondents differed on what particular changes
are necessary.
Australians have faced depression and war without
flinching and without losing faith in themselves.
There is more to peoples' pessimism than our
current economic crisis. Contemporary Australia, it
seems, no longer believes that the "system" can give
us what we need. Ordinary Australians are losing
faith in themselves and in their country.
The great reform program contained in this
document is our answer to Australia's problems.
This is our response to those thousands of
Australians who heard our call to tell us what
Australia needs.
The Liberal and National Parties believe that what
really needs to change is the belief that Australia
cannot change for the better. Our program is based
on the fundamental belief that whatever is wrong
with the Australian economy and whatever can be
improved in Australian society, there's nothing at all
wrong with the Australian people.
Australia faces daunting problems. Our foreign debt,
our army of jobless, the threats to our trade and other
major problems can be overcome and will be
overcome by the measures detailed in this reform
package. By far the biggest problem facing
Australia, indeed the only problem which can bring
us down, is the apparent lack of confidence which
ordinary Australians now have in their capacity to
rebuild their country.
The reform program set out in this document is
based on a simple proposition: Australians have all
the ability and enterprise this country needs
provided they are helped rather than hindered by the
Figbtback! - It's Your Australia

Overcoming A Generation of Failure

In the 1960s the vast majority of Australians felt
good about the "Lucky Country". Today,
Australians' feelings about their country are much
more complicated and ambivalent.
In part, this is due to deeper understanding of old
problems. But in part, it is popular frustration at
hopes that government has raised but not fulfilled.
Whitlam won office pretending that government
could solve every problem - turn businessmen into
philanthropists, doctors into welfare workers, bus
drivers into public servants and suburban Australia
into a Garden of Eden.
In the end, the enduring impact of the Whitlam era
on Australian public life was not simply the
economic shambles he bequeathed to his successors
but a stylish contempt for ordinary Australians.
Who, after all, would try to do everything for people
except someone who believed people were incapable
of doing much for themselves?
The Fraser Government came to office facing an
economy destabilised by an explosion of
government spending, labour costs and regulations.
It began the huge task of restoring stability, reining
in government spending and reducing union power.
It set out a new agenda of rolling back big
government.
Unlike Whitlam, Fraser managed responsibly. The
economy was steadied but the task of developing the
program that would address the fundamental reasons
for the decline in the freedom of Australians to build
their own lives was just begun. The recognition of
the immensity of the structural reforms required was
in its early days. But a new agenda was set and the
Hawke Government came to office promising
smaller government and lower taxes. The reality
proved to be very different.
23

The Hawke Government stands squarely in the

Whitlam tradition of big, interfering and ineffective
government. They both made government a major
provider of people's incomes - Whitlam through
"universal" health and `free" education; Hawke
through the "social wage" and the "Accord". They
both peddled myths about "free" health care and
"free" education until reality closed in on them.

in need who cannot help themselves. But we do not

believe that we must help those who choose not to
help themselves.

They both made grandiose promises they never kept

(such as Whitlam's "Charter for Children" and
Hawke's infamous "no child will live in poverty by
1990" pledge).. They both supported the
amalgamation of trade unions to give them added
industrial and financial muscle. They both dabbled
in social engineering through increasing dependence
of people on government welfare and programs.

Australia today is a very different country and the

foundations of prosperity have been badly damaged.
The policies needed to restore those foundations are
not the same as those of Sir Robert Menzies' day,
but the objectives and the values on which they are
based are the same.

Yet Australians remain remarkably sceptical of

government and much more ready to trust
themselves than their governments. Our problems
mean that our leaders must re-dedicate themselves to
the values Australians have in common. Essentially,
this means abandoning the habit of looking to
government to solve all our problems. In many
cases, it means restoring to people the independence
they have lost to social engineers.
The first priority is creating the conditions where
everyone who wants work can obtain a job. On this
subject, the differences between Labor and the
Liberal/National Coalition go to the very heart of
what is fair, equitable and compassionate in policy
making.
For us, equity means giving everyone the right to
pursue their own goals in life without being
penalised and brought back to the lowest common
denominator if they succeed. For Labor, equity
means promoting government as the first, not the
last, resort and concentrating more on redistributing
wealth than creating it.
For us, equity means fairness between all sectors of
the community, rural and metropolitan, rich and
poor, young and old. For us, compassion means a
job for everyone who wants one, providing
incentives to self-respect through work rather than
government welfare and giving appropriate
assistance to those in greatest need.
For Labor, compassion means compensating
individuals for the opportunities that Labor never
gave them.
Liberalism in Australia has always stood for pride in
our achievements as a people, and for the values of
personal responsibility, reward for effort and the
rejection of mediocrity.
We believe that strong government, but not big
government, can best achieve this goal. We believe
that the community has a responsibility to help those
24

The achievement of the Menzies Government was

that, unlike the Whitlam and Hawke Governments,
it made so much of its vision a reality. It made the
dreams of many Australians come true.

Building A Constituency For Change

Since the 1990 Federal . Election, the Liberal and
National Parties have been building a constituency
for fundamental change in Australia. We have
pointed to Labor's inability to address the
underlying causes of our current problems, defined a
new role for government, highlighted the areas
where reform is necessary, and developed a strategy
for stable growth built on greater freedom and
incentives for individuals and businesses.
We are determined to give Australians something to
believe in, something to hope for - a vision of what
our country can be, based on a clear view of what we
stand for and the values in which we believe.
We want to help build a country with an economy
that can compete with the best in the world. We
want young couples to own their own homes and to
raise their families in a country of expanding
opportunities. We want farmers to be able to keep
the land which they and their families have worked
so hard to develop. We want those in business to be
able to turn their ideas into reality and to be
rewarded for doing so. We want tradespeople and
professionals to be able to reap the rewards of their
skill. And we want our young people - as well as
those returning to education - to know that their
skills are equal to the best in the world.
We want government to help all Australians to
realise their destiny, and not to stand in their way.
But desire and hope will not make all this happen.
Significant changes in public policy and community
attitudes will be required. Those changes are not
threats to the goals and aspirations of individual
Australians but the necessary means of achieving
them.
The Australian community needs to demonstrate the
drive, enthusiasm and innovation to make the most
of the new incentives to work hard, save and invest.
It will only do so if it is confident that everyone can
Fightback! - It's Your Australia

share in the benefits of change and that all will pull

their weight in the processes of reform.
Achieving an effective constituency for change
requires more than honesty and realism from
political parties. Average Australians must regain
their confidence that politicians and bureaucrats
understand their hopes and fears, identify with their
goals and aspirations, and appreciate (as well as
share) our current difficulties.
Australians know that "Canberra" is too divorced
from reality and too protected from the problems
which economic mismanagement has created. This
has to change. And our program of reform makes
specific proposals to help bring about that change.
Australia Can Do It
As much as a fundamental change in policy
direction, Australia needs a change of attitudes.
Governments can never substitute for individual
achievements. The Coalition's commitment to
individual choice, private enterprise and economic
growth is one that derives not from ideology but
from practical results. Our own history testifies, and
the collapse of socialism everywhere confirms, that
economic growth based on individual private
enterprise is the best way to generate a dynamic
economy, to maximise freedom and to enable
society to care properly for those in real need.
Private enterprise is a means to an end and not an
end in itself. It is the means to achieving both a
more just and a more prosperous. society. It is the
means of achieving a fairer and more genuinely
compassionate society.

Fightback! - It's Your Australia

Given an equal shot at independence, Australians

have shown what they can achieve, at the same time
promoting human values and an improved life for
all.
The story of Australia has been the story of an and
continent becoming one of the world's great
breadbaskets, feeding millions in other Iands. The
story of mining in Australia is of dedicated pioneers
defying odds and expectations to build a worldbeating industry. The best stories of sporting
Australia are of shy heroes who haven't let fame go
to their heads.
The greatest assets which our country has are the
values which have been passed down by generations
of Australians who came to this land seeking
freedom, opportunities and self-respect for
themselves and their families. These are not the
values of some historic past. They are values of
enduring importance to all Australians, and the task
of government is to make sure that they can be given
full play.
Above all else, the program put forward in this
document is aimed at giving Australians the chance
to show what they can do when the official, the
regulator and the taxman get off their backs, and
when they are once more guaranteed rewards for
their achievements and opportunities for the taking.
It is a program based on trust and regard for the
individuals and the families, the farms and the
businesses, the teachers and the scientists, who hold
the destiny of this great country in their hands.

25

4. FRAMEWORK FOR CERTAINTY:

A NEW ROLE FOR GOVERNMENT
The Liberal and National Parties propose
government which is less costly but more effective,
smaller but stronger, less intrusive but which
enforces clear, general laws fairly and equally
applied. We propose a government which offers
leadership but does not dictate.

The powerful have extracted benefits and privileges

for themselves: special protection and regulations,
generous subsidies, compulsory memberships. The
costs have been higher prices and higher taxes,
lower economic growth, less innovation, and
declining international competitiveness.

Essentially, the role of government must be to

provide a framework of policy and law within which
people can plan with confidence. Government
should set the framework . for action but not
determine the content of action which should, so far
as possible, be left to individuals. The failure of
government to provide such a satisfactory
framework has been a central cause of AustraIia's
recent decline.

Economic freedom has as its centrepiece people's

right to buy and sell, invest, improve property, and
freely contract with one another, without needing
permission from government. Free markets work
because individual people, co-operating peacefully
and voluntarily through markets, can achieve much
that politicians and bureaucrats cannot achieve using
compulsion and direction.

The Liberal and National Parties propose to bring

about an historic redefinition of the role of
government in Australia, so that, in relation to each
other, people and government know exactly where
they stand.
There is also an important wider purpose.
Australia is increasingly part of the wider world of
trade and finance. The challenge for modern
governments is to make their societies and
economies attractive to the people, capital and
technology which can easily find another base. The
task is to give these mobile "factors of production" a
secure home by offering them competitive rates of
return and good potential for productivity growth.
The most effective way for governments to meet that
challenge in the 1990s is to create a predictable and
orderly environment which will best enable
individuals, families and businesses to achieve their
values and plan for the future with certainty and
confidence.

Government and Freedom

Throughout our reform program we emphasise the
tremendous benefits to Australia of expanding
individual freedom and reducing unnecessary
interference from government. But it is not just
unwise government intervention that we aim to
reduce.
Over this century various powerful interests - private
companies, government authorities, trade unions,
and, increasingly, powerful lobby groups - have
trampled the freedom of the average citizen.
Notwithstanding attempts to justify these intrusions
in terms of the public interest, they have mostly been
at the expense of the majority of people.
26

The most important benefit of terminating

unjustified interference with people's freedom is
that everyone is able to make full use of their own
knowledge and experience without being hamstrung
by some rule put there by government to give a mate
a special privilege. People can make decisions on
the merits of the case. Motivation is higher and
opportunities immensely greater.
In a freer Australia, the power of individual people
to achieve what they want in life will be extended,
and the threats to the public interest from
concentrations of monopoly and union power
greatly reduced. A much sounder foundation for a
democratic Australia will have been set in place.
This expansion of freedom will be the absolute heart
of the reform agenda of the Hewson Government. It
is the most important advance which can be made to
achieving government based on the public interest.
Our emphasis on the importance of reducing
regulation and taxation does not mean a "laissez
faire" approach. Markets need a clear framework of
rules within which to operate properly.
Governments must promote competition, ensure fair
dealing between people, resolve conflicts and
protect the weak against exploitation.

The Limits of Markets

Freer markets can achieve a great deal, but they
cannot achieve everything. The Liberal and National
reform program is not based on a blind faith in
markets. Markets are simply one of the means
available to society to achieve a better life.
Successful nations are those which strike a proper
balance between economic freedom, wise laws,
private morality and ethics.
Fightback! - It's Your Australia

The Liberal and National Parties' program is based

on a clear recognition of the limits of markets, as
well as their capacities.
.Sometimes "free" dealings between people can
harm the interests of third parties - by polluting
rivers or the air, destroying the amenity of
neighbourhoods. If so, government must be ready to
intervene to protect the wider community.
There are some goods and services which people
working individually through free markets may
not provide, because once provided, they become
everyone's property. Apart from defence, and a
legal framework, aspects of basic research, clean
air and water are examples. Government has a
role in ensuring that these "public goods" are
available.
There are some goods and services which confer
such benefits on everyone that government action
may be necessary to ensure they are provided at
an optimal level. Aspects of education and
training services are of this kind.
There are some goods and services which are so
complex - or whose full character is "hidden" that consumers have great difficulty in assessing
whether they are being satisfactorily provided or
not. Many products and aspects of medical
services have this character. Government must
ensure that consumers are protected.
In many cases these limitations of markets have
been used to justify excessive government
intervention. But the limits, nevertheless, exist and
must not be ignored.
Beyond these limits, the ability of people to
participate in markets is affected by their income
levels. In Australia problems of poverty mainly
result from health or family crises or fluctuations in
the wider economy. Government must make sure
that there is a safety net which protects people in
these conditions and which gives them full
opportunities to regain their independence and
control over their own lives.
Finally, there are those who see some advantage in
shielding themselves from the pressure of the market
to "lift their game". Some put great effort into
stopping competition and extracting, invariably
from government, monopolistic privileges at the
expense of the rights of others. Government must
ensure that monopolists are not allowed to claim
privileges and must protect the rights of everyone to
freely compete in the market place under laws that
apply to the powerful as much as the weak.
The Liberal and National Parties reform program
fully takes these matters into account. This is more
than a program to restore people's rightful economic
freedom. It is a program for positive and soundly
based government.
Fightback! - It's Your Australia

Community
There is a further dimension of the freedom we are
determined to restore to Australians. Beyond the
commercial marketplace, there is a whole sphere of
private life where relations between people are based
on affection, altruism and voluntary association. It
is here - in the families, churches, clubs and local
activities of Australians - that the foundations of
community are laid down. It is here that the real
networks of mutual support, of welfare and
sustenance, exist.
One of the many fallacies of socialism - shared by
the promoters of big government - has been that
politics, power and government are the heart of
"community". The greatest threat to a strong sense
of community in Australia today is the attempt by
the social engineers and powerful interests to impose
their view of the world by laws, taxation and
decisions taken far away from the real life of people
in their local communities.
Our emphasis on free markets does not suggest or
imply that the most important relations between
people are commercial ones. A decent society must
be based on a strong sense of fair and ethical dealing
and a commitment to the interests of the community
beyond the marketplace.
Moral community and economic freedom,
nevertheless, are closely related to each other.
Properly functioning markets are a by-product of an
ethical community. Because markets are based on
voluntary co-operation and decentralised decisionmaking, they also create the only conditions in
which a moral community can emerge and be
sustained. The collapse of the socialist states of
Eastern Europe and the Soviet Union in a welter of
corruption and exploitation shows the truth of the
saying that power corrupts, and absolute power
corrupts absolutely. Economic freedom does not
guarantee morality, but it fosters it and - for its full
benefits to be achieved - requires it. The wiser the
framework government provides for economic life,
the closer the harmony between a liberal economy
and a moral community.
In the late nineteenth century a compelling vision
was articulated for Australia that this great southern
continent could be the home of the most decent,
humane and equal society the world had ever seen.
Our message is a simple one. An Australia where
people have the freedom to pursue what is important
to them will not only be more productive and
internationally competitive. It will also be an
Australia which has the best possible chance of
reclaiming the grand vision of our founders - an
equal and democratic state without parallel in the
world.

27

The Limits of Government

Government which tries to correct every social ill
invariably creates more problems than it solves. The
more governments replace wide freedom within
clear rules with a raft of specific regulation designed
to keep everyone happy, the closer they come to
dictatorship.
The Hawke Government's ad hoc, deal-driven
policy interventions have meant that, in many areas
of national life, no-one really knows what they can
and cannot do.
The Government has . made numerous capricious
decisions - on media ownership, environmental
rules, foreign takeovers and tax administration only to change them just as , arbitrarily. It has
allowed the usual rules of market liability to become
a political lottery. It bailed out Kodak but not other
failing businesses. It guaranteed woolgrowers that
their price support scheme would remain, only later
to renege on that commitment.
The Government continues to tolerate rigged
markets in domestic air and rail transport, transTasman shipping, telecommunications, power and
water utilities and, above all, in the provision of
personal labour - which ensure that decisions are
made on the basis of political clout.
Under Labor, government fails to treat different
citizens and different sections of the community
equally. When the Hawke Government has to
choose between some of its favourites and the
interests of all Australians, it always prefers its
mates.
Throughout the term of the Hawke Government,
favoured lobby groups - most notably the ACTU have exercised a blocking veto on the most vital
reforms, that is, those designed to achieve job
flexibility, business efficiency and,. of course,
fundamental tax reforms of the kind spelt out in this
package.
Labor has extended "government-by-deal" to the
operation of many of our national institutions.
Labor compromised the independence of the
Reserve Bank in 1989 when it engineered a change
in Bank rules to keep housing interest rates down
when its policies had failed to do so. On other
occasions it has manipulated interest rates for blatant
political ends.
The Government has bullied, denigrated or ignored
the Industrial Relations Commission whenever its
decisions have diverged from the Government
"line".
In an extraordinary display of arrogance, Labor
ignored a ruling by the High Court (on MPs'
postage) which it found inconvenient.
28

Labor has even resorted to subverting the

constitutional Monarchy - not on the basis of any
considered reflection - but as a cynical exercise
timed to distract attention from the deep policy and
leadership divisions within its own ranks.
Under Labor, government has become increasingly
out of touch with the needs and aspirations of the
people whom it is supposed to serve. Politicians and
officials have become too cocooned in Canberra.
The Public Service has become increasingly in need
of infusions of outside talent. And there are now
important benefits to be gained from decentralising
some key policy advisory areas out of Canberra.
The role of , government under Labor expresses the
traditional collectivist belief that Big Brother knows
best. Whether the decision involves the ACTU, the
Green movement, or Labor's own factions, it's the
views of the leaders which count and not those of the
rank and file.
Labor's compulsory training levies, compulsory
superannuation, compulsory arbitration, compulsory
Accords and a refusal to act against compulsory
unionism exemplify a philosophy of government
whichcontinually resorts to coercion and
compulsion in order to achieve its aims.
Forced amalgamations and attempts to administer
the universities centrally have damaged the quality
of education. Decisions taken in consultation with
unions and Labor factions but not medical providers
and consumers, have damaged health policy.
Yet every compulsion undermines motivation and
distorts decisions. All compulsion strikes at the
roots of growth and prosperity.
No democratic government should lightly resort to
coercion. The Liberal and National Parties believe
that compulsion is justified only to ensure an
equitable sharing of contributions to community
well-being (as in the taxation laws or aspects of
health policy), or to protect those members of the
community who cannot look after themselves (as in
compulsory schooling). But compulsion is always
very costly. It should always be a last, rather than a
first, resort and should never become simply a
means of achieving political objectives.

The Framework
The primary role of government must be strategic and not focussed on the distribution of benefits and
privileges to its friends. The main task of
government is to provide a framework of law within
which people can plan their own lives in freedom
and with confidence.
The framework Australia requires, and to which the
Liberal and National Parties are committed, is one
which promotes prosperity and full employment - a
framework which provides:
Fightback! - It's Your Australia

 low inflation and sound money;

clearly defined private property rights that
preclude sudden and arbitrary changes in
ownership rules or environmental requirements;
fair dealing in open and competitive markets as
well as the acceptance of liability by market
participants;
equality before the law;
freedom of contract;
exposure of monopolies to competition;
protection for the community, especially its
weaker members;

Public policy may distinguish between activities

which are equally legal (for instance, it may seek to
discourage smoking or to encourage saving), but we
have sought to minimise distortions to maximise
efficiency.
The framework set out in this document is designed
to harmonise the private and voluntary activities of
individuals, families and businesses with the public
interest and to promote personal independence and
self-reliance.
It is a framework for a society based on equal
opportunity for all, not privilege for the influential
few. It is a framework within which those who "lift
their game" will be rewarded. And it is a framework
for an ethical political system and an ethical society
in which government's only bias is towards the
public interest.

and promotion of the public good by cultivating

individual excellence.
The taxation laws are a key element of such a
framework. Tax laws work best when they treat all
people and all activities equally. In setting the tax
rules, government must aim to be neutral between
the different objectives which individuals, families
and businesses pursue - provided those objectives
conform to the general law of the land.

Fightbackl - It's Your Australia

29

5. THE CHALLENGE
The economic challenge for Australia in the 1990s is
to achieve stable growth and expanding job
opportunities without rising inflation, and to start to
repay our huge foreign debt.
Over the next decade, about 1.4 million people will
enter the Australian workforce. If these additional
people are to be employed and if we are to make
substantial reductions in the current levels of
unemployment, nearly two million jobs will need to
be generated over the next ten years.
Three scenarios showing the effects of three
different economic programs illustrate what must be
done to make a sustained attack on unemployment.
The first scenario (Base Case) shows the impact of
"crisis" policies that attempt to protect real wages.
The second (Low Road) shows the effects of
following policies which deliberately cause a
decline in real wages. The third scenario (High
Road) shows the effects of a program of reform such
as that outlined in this document.

low real wages and an unemployment rate still at

7% by the year 2000.
It is clear from these scenarios that limited changes
of policy will not do the job. Moving back towards
full employment requires sustained economic
growth. This in turn requires higher productivity
and making room for private investment by cutting
back on the public sector.
The third "High Road" scenario assumes the
implementation of microeconomic, Iabour market
and taxation reforms. These reforms will raise
labour productivity compared with the "Low Road"
scenario. Lower government spending allows lower
income taxes, reduces government borrowing, and
induces a more competitive exchange rate.
These reforms encourage exports and stabilise debt.
Most important, they lead to the creation of around
two million soundly based jobs - enough to halve the
rate of unemployment by the end of the decade. The
scenario projects unemployment falling to 5.2 per
cent by the year 2000.

These scenarios have been prepared using the

Access Economics Murphy model of the Australian
economy (and are fully detailed in the
Supplementary Papers). This model is the result of a
decade of research at the Treasury, the Office of the
Economic Planning Advisory Council, and the
Australian National University.

This analysis shows that the stakes are high. Current

economic policies are not on track. Lifting Australia
out of the disastrous position into which it has fallen
requires a comprehensive program of reform and
change. Only such a program provides the certainty
of growth and jobs.

The "Do Nothing But Protect Real Wages" (Base

Case) scenario graphically illustrates the illusion of
paying ourselves money we have not earned. Trying
to maintain real wages without lifting our
productivity game:

If Australia is to escape from the boom/bust cycles

of the past, and if there is to be a sustainable and
lasting recovery with job growth through the 1990s,
the challenges that need to be met are clear. We
must:

doesn't work: real wages fall anyway;

is unfair: the unemployment rate by the end of
the decade is higher, a 8.5%;
produces poor productivity and business
investment; and
accelerates the increase in our foreign debt.
The "Do Nothing" (Low Road) scenario, based
essentially on a steady as she goes policy program,
generates:
mediocre productivity growth and low business
investment;
further increases in foreign debt; and

30

think strategically as a nation and develop a

shared sense of national purpose;
make full employment and price stability
priorities for policy making;
develop our industrial structure in a way which
exploits the enormous potential to add value to
our traditional agricultural and mining
commodities, which develops other "brainbased" manufactures and which makes the most
of the emerging opportunities in areas such as
finance, tourism, medicine and legal services;
increase the international competitiveness of our
economy - thus creating jobs;
improve our productivity;
rebuild business, particularly small business;
Fightbackd - It's Your Australia

 achieve higher levels of productive investment in

our export and import competing industries;
increase our national savings; and
encourage individual initiative and private
business rather than big government and central
control.
In short, our challenge is to become a much more
productive, dynamic and competitive economy so
that we can trade our way out of Labor's debt trap.
We need a considerable period where we produce
more than we consume and where we develop a
genuine export culture.
The scale of this challenge is considerable - as the
following chart shows. We need to achieve a shift of
3.75 per cent of GDP into net exports over a
sustained four year period just to stabilise the growth
in our foreign debt by the mid-1990s.
The fact that Australia has not achieved a shift of
this magnitude over the past 25 years, Iet alone
sustained a shift, demonstrates the size of the task. It
can occur - but only if improvements in
competitiveness, productivity, investment, savings
and private sector growth are achieved

The World Economic Forum, in conjunction with

the Lausanne Business School, publishes a detailed
annual "World Competitiveness Report" which
examines different aspects of 23 industrialised
countries' competitiveness. This report emphasises
the attractiveness of these countries to investors
According to the latest data in 1989 Australia
finished 10th, in 1990 we were 13th and, in 1991,
16th out of 23. At this rate of decline, we will be last
in two years time.
Our competitiveness is declining, depressing
investment and job prospects in Australia.
We have tended to create obstacles for ourselves
despite our rich natural endowments, our mineral
resources, our laud and our educated workforce.
The obstacles confronting Australian firms and
individuals are the result of poor attitudes and
practices encouraged by a myriad of home-grown
and man-made arrangements which have built up
over decades.

Australia's Debt Hurdle

THE DEBT HURDLE

WHAT WE HAVE DONE BEFORE
AND WHAT WE NEED r I' 0 DO NOW
a sustained contribuLion of :I.5 % of GT)P is roquired
wb,t Lire Le -obieve is rut4,.

4
4
3
'-`

b.L b chirvrh

in

thr p..L

r^^__^^^r^

2
I

2
up

i wFutui -i

70

l!

1}^' a }as h , ! ! +.'' ^ ^'.i^-i-

t - {.. a^i_:^ l t.{

83

73

' ^ ^[aia_}^^

t) k

Q 1.. A RT ERS
'-^" Net Exports

Required Hurdle

FIVE YEAR MOVING AVERAGE

Figbtback! - It's Your Australia

31

In his study "The Competitive Advantage of

Nations", Michael Porter stated that:
"A nation's companies must relentlessly improve
productivity in existing industries by raising
product quality, adding desirable features,
improving product technology, or boosting
production efficiency. They must develop the
necessary capabilities to compete in more and
more sophisticated industry segments, where
productivity is generally high. They must finally
develop the capability to compete in entirely new,
sophisticated industries."
This statement sums up the challenge facing
Australian firms in the 1990s.
There is much scope for Australian firms to add
more value to their output by processing raw
materials that would otherwise be exported in bulk
and by producing more sophisticated manufactures.
In its 1988 study "Raw Material Processing: its
contribution to structural adjustment", the Economic
Planning and Advisory Council found that:
"Australia has a number of advantages as a
location for early-stage processing of many raw
materials. In most cases the underlying factors
are some combination of proximity to natural
resources and savings in international freight,
relatively low energy costs, relatively low labour
costs, well-developed infrastructure and stable
political conditions."
The study identified scope for further processing of
raw materials (and value added) in forest products,
wood processing, meat and livestock processing,
steel, ferro-alloys, aluminium and mineral sands.
But, at the same time, EPAC concluded that
domestic factors impeded the further expansion of
raw materials processing, including unnecessary
cost penalties on transport, construction, tariffs and
fuel excise. It also found that large, long term
investments may be threatened by excessive
uncertainty about future environmental policies.
Since the study was published in 1988, the Hawke
Government has completely shaken any confidence
of prospective investors in Australia with its
decisions to halt the Wesley Vale pulp mill, prohibit
the mining of Coronation Hill and its repeated
postponement of the construction of the third
runway at Sydney airport.

exporters" and was hampered by "the prevalence of

entrenched bad practice", it also concluded that there
is significant scope for Australia to expand its
exports of services particularly in communications,
transport, education, tourism, medicine and finance.
Australia must respond to this challenge to increase
the value added of our exports, to transform the
structure of our manufacturing base towards the
production of more sophisticated, differentiated,
brain-based products and to capture the export
potential of our service sector.
Studies by the Industry Commission (IC) and the
Business Council of Australia (BCA) indicate that
the policies advocated by the Liberal and National
Parties could boost GDP, once the structural
adjustments have been achieved, by at least 15 per
cent. In other words, GDP could be permanently
increased by at least $60 billion.
Some estimates of relevant policy changes and their
effects are listed in Table 4.1.
The Liberal and National Parties' tax reforms will
add to the long-term benefits of these microeconomic reforms.
For example, the Centre of Policy Studies has
estimated that the replacement of the wholesale sales
tax with a broadly based goods and services tax
would increase GDP by between 0.5 and 1 per cent
in the short-term. Moreover, Chapman and Vincent
estimate that the abolition of payroll tax will yield
GDP increases of between 1.4 and 1.8 per cent in the
short-term. Finally, Industries Assistance
Commission (1986) estimates suggest that the
abolition of petroleum excise could increase GDP
(in the short term) by a minimum of 1 per cent.
Clearly, a reform program along the lines advocated
by the Liberal and National Parties promises an
enormous increase in output and jobs.
In fact, Australia can do even better - under the
LiberaijNational reform program -than the Industry
Commission estimates. For example, the IC does
not include the further efficiency gains to be
achieved from the privatisation of Telecom in a
competitive environment.

In fact you have to think long and hard to identify

the last major project that got off the ground in
Australia.

Improvements of the magnitude indicated will create

a dynamic and expanding economy that offers
reward, incentive and security for all Australians.
Although many of the benefits are long term, and
involve short term adjustments, we must not shirk
from implementing the Coalition's entire program
immediately. Delay will cost us exports, investment
and jobs.

Although the 1990 Pappas Carter Evans and Koop

report on Australian manufacturing, "The Global
Challenge", found that Australia generally lacked
sophisticated manufacturers and "strategic

The opportunities are there. But to benefit fully from

these changes to workplace structures we need to
make better use of our human potential. At every
level of the education and training system, we need

32

Fightback! - It's Your Australia

Table 4.1

REFORM

GDP INCREASE

Domestic water transport

(IC) (a)

0.4

Bulk commodity handling

(IC)

0.6

International shipping (IC)

0.2

MEASURES INVOLVED
Reduction in domestic water
transport costs by 20 per cent
through the opening up of
coastal shipping to foreign
competition, significant
improvements in work
practices on the waterfront,
cheaper port services and
reduced delays
20 per cent reduction in farm
to wharf transport from
removal of monopoly
carriage rates
Freight reductions of 20 per
cent (non-bulk) and 50 per
cent (bulk) across the Tasman
and a cost savings of 15 per
cent on other routes

Rail transport (IC)

1.5

Cost savings to reduce rail

deficits and full cost recovery
in freight and passenger rail

Domestic aviation
(IC) (b)

0.1

10 per cent improvement in

labour and capital
productivity

International aviation (IC)

(b)

0.2

Road transport (IC)

0.5

Post and telecommunications

(IC) (c)

0.5

Fightback! - It's Your Australia

20 per cent reduction in

international airfares from
deregulation
Cost recovery in each vehicle
class and a 10 per cent
productivity improvement in
road construction and
maintenance
Reduction in Telecom and
Australia Post unit labour and
capital requirements of 20 per
cent and an increased rate of
return for Australia Post

33

REFORM

GDP INCREASE

Electricity supply (IC)

0.4

Rural and manufacturing

assistance (IC)

1.1

Water services (IC)

0.3

Contracting out and better

asset management, reducing
water service costs by 15 per
cent

Contracting out (IC)

1.0

Reductions in the costs of

certain government services
by 20 per cent

Labour market reform (BCA)

5.68

Capital productivity (BCA)

0.55

34

MEASURES INVOLVED
Full cost recovery, the
removal of excess reserve
plant margins and improved
work practices
Elimination of tariff, quota
and bounty assistance

An increase of about
25 per cent in labour
productivity (achievement of
best international practice)
Achievement of best
international practice in
capital productivity

(a)

The full privatisation of Australian National Line will reduce costs and, hence, the increase
in GDP would be greater

(b)

The full privatisation of Qantas, Australian Airlines and the Federal Airports Corporation
would increase significantly the gains in GDP

(c)

The privatisation of a large proportion of Telecom in the Coalition's first term will result
in substantially higher efficiency and, hence, GDP gains

Fightback! - It's Your Australia

to make better use of our human potential. At every

level of our education and training system, we need
to stir the often dormant abilities of our people by
promoting excellence, competition, intellectual
curiosity and industrial creativity. This is why a
massive boost to education - particularly science
education and training - is a key part of the Liberal/
National reform program. Our education reforms
will enable Australians to take full advantage of the
reformed economic structures we will create. We are
determined in this way to help industry to seize all
the opportunities which are there for the taking.
For too long, many of our failings have been
conveniently blamed on the small size of our
domestic market and the lack of economies of scale
for our industries. Such thinking neglects the reality
of the huge, expanding and dynamic markets on our
doorstep in the Asia-Pacific region.
If you think small, you will be smallf
The Asia-Pacific region offers the greatest growth
prospects in the world and the greatest opportunities
for Australian exporters. In forty years time, the
Asia-Pacific market will be more than twice the size
of the American and European markets combined.

Australia should set its sights realistically high. We

should be a major processor of raw materials. We
should be specialists in sophisticated manufactures.
We should aim, by the year 2000, to be the most
important financial centre in the Asia-Pacific region
after Tokyo. We should be the major provider of
health services to the region. We should be a
regional centre for legal services. We could be the
region's main tourist destination. We should be the
region's centre for educational services.
We should be all these things and more given
courage, consistency and hard-headed strategic
thinking in government policy-making and given a
change in community attitudes, particularly as they
relate to our export culture.
This is why the Liberal and National Parties believe
that major change is both necessary and desirable.
We are not pursuing change for its own sake. But
we are simply not prepared to stand by while
Australia's great opportunities are squandered by
mismanagement and misplaced complacency.

Making Australia a major economic and political

player in the Asia-Pacific region by the Year 2000 is
the Liberal and National Parties' strategic goal.

Fightbackl - It's Your Australia

35

6. MEETING THE CHALLENGE - AN INTEGRATED

STRATEGY FOR JOBS AND GROWTH
The reform program which the Liberal and National
Parties propose is designed to solve Australia's debt
and unemployment crisis and to stimulate economic
growth.
Our program is also designed to restore individual
responsibility as the foundation of our community
life while promoting important social objectives. It
aims to change attitudes, improve relationships
between employers and employees, foster social
harmony and provide world class educational
opportunities for our young people.

JOBS STRATEGY FOR THE NINETIES

In Australia right now, the most immediate obstacle
to individual well-being is slow growth and
unemployment. Without a job, people lack the
freedom to make the most elementary choices about
how they live. The fundamental objective of the
Liberal/National reform program set out in this
document, the one task to which all of our policy
changes are ultimately directed, is the restoration of
full employment - which we define as the ability of
everyone who wants to work to obtain a job.
Expanding job opportunities and stable economic
growth cannot be achieved without our economy
becoming more internationally competitive, without
higher rates of productivity; without a more dynamic
and expanding private sector; without higher levels
of skills and investment; and, without higher levels
of saving.
The only way that government can provide a
framework in which these objectives can be
achieved is to implement a wide-ranging reform
program focussed on building more co-operative
workplaces, more competitive businesses and lower
and fairer taxes.
Our program is directed at removing the cost
disadvantages that are impeding business
investment, and thus destroying job growth.
By pursuing a strategy built on these foundations,
sustainable job growth can be achieved within a
dynamic and expanding economy.
Our reforms are designed to create two million jobs
over the remainder of the decade and to halve the
unemployment rate which we will inherit from the
Hawke Government.

Our tax changes will give people more incentive to

find work themselves and more incentive to create
work for others.
Our sweeping microeconomic reforms will take the
shackles off Australian business and give our
managers and entrepreneurs the chance to take on
the best and win.
Our education and training policies will make sure
that Australians have the knowledge and the skills to
take full advantage of the opportunities that will
open up.

A BETTER AND FAIRER SOCIETY

The reform program outlined in this document will
not succeed unless all Australians see that they have
a stake in the future. Economic success cannot be
built on social distress. The unemployed must not
be thrown on the scrap-heap. They must receive
every assistance to find their way back to personal
independence.
Our reforms ensure that all Australians will have
access to high quality health care, world-class
schools and universities, and a welfare system which
gives generous help to those who cannot help
themselves while encouraging self-reliance. Our
reforms are also aimed at improving conditions for
pensioners and the retired, for the sick and the
disabled.
They provide an assurance to all Australians that our
magnificent natural environment can be restored and
protected while we continue to develop our
resources and our industry.
The whole thrust of our policy is to strengthen the
individual against the state - in particular, to
strengthen the forgotten people, the low and middle
income earners, against the forces which control and
limit their lives.
The principal focus of this package is to help
average Australians help themselves.
A key feature of the reform agenda set out in this
document is that its constituent parts are elements of
a comprehensive package. Each of the reforms
complements and reinforces to the effects of the
others. Every element is important, but no part is a
solution in its own right, and none will be
implemented as such.

Our industrial relations reforms will ensure that

antiquated rules do not stand in the way of people
obtaining work.
36

Fightback! - It's your Australia

A 20 POINT PLAN TO REBUILD AND

REWARD AUSTRALIA
Our strategy to achieve economic growth, an
increasing number of jobs and greater social equity
is based on this 20 point plan:

16. a realistic immigration program;

17. speedier development approvals while
protecting the environment;
18. building a better Federation;

1.

a commitment to price stability;

19. a new focus for trade policy;

2.

labour market reforms to achieve more

productive and rewarding workplaces and to
create more employment;

20. putting Australia first - a more relevant

framework for foreign policy and national
security.

3.

lower, fairer taxes including;

1. A COMMITMENT TO PRICE
STABILITY

record reductions in personal income tax;

abolition of wholesale sales tax and its
replacement by a Goods and Services Tax;
reductions in capital gains tax;
abolition of superannuation lump sum
taxes;
abolition of payroll tax;
abolition of petroleum product excise;
reduction in business input taxes including
for import-competing business and on
exports;
4.

measures against tax avoidance;

5.

a new national savings strategy (new

superannuation arrangements and a new Tax
Free Savings scheme);

6.

health security;

7.

family and pensioner assistance measures;

8.

reductions in government waste, improvements

in efficiency and contracting out;

9.

privatisation;

10.

tariff reform and anti-dumping measures;

11.

infrastructure reforms:
land transport;
waterfront;
telecommunications;
'aviation;
utilities;

A commitment to full employment can only be

realised if government policies provide an
environment in which business can plan with
confidence to achieve sustainable economic growth
in the private sector. Providing such a framework is
one of the keys to creating jobs.
The basic tasks of macroeconomic policy are to
maintain sound money, establish low and
predictable taxes, ensure low and stable interest
rates, preserve a competitive and stable exchange
rate, and maintain predictable and sustainable
spending policies.
For nearly 20 years, Australia's inflation has
averaged almost nine per cent and has been
approximately double that of our major trading
partners.
Inflation is a form of financial fraud that discourages
saving and investment and distorts production and
investment decisions.
The Hawke Government has used record interest
rates to drive the economy into a recession and get
inflation down. Getting inflation down further does
not mean even higher interest rates and a longer
recession. It means using the various arms of policy
rather than employing interest rates as a blunt
instrument to knock the economy out.
A Hewson Government will pursue a co-ordinated
anti-inflationary strategy:
we are committed to policies aimed at the
medium term goal of reducing inflation to
below two per cent, and keeping it there;
we will undertake a major reform of the tax
system;

12, competition policy;

13. world class education and training;

we will reduce Government spending by

cutting expenditure;

14.- building Australia as a world-class financial

centre;
15. genuine assistance for the unemployed;
Fightback! - It's your Australia

we will make major public sector savings

we will reduce rigidities in the economy by

freeing up the labour market, embarking- on
major infrastructure reform and reducing tariffs
to negligible levels by the year 2000.
37

we will implement a national savings strategy

to boost both long term and short term saving.
We will also legislate to give the Reserve Bank
effective independence and a clear mandate to
achieve medium term price stability. The Governor
will be required to be more accountable for his
actions, including regular testimony before
Parliamentary committees. The Government and its
agencies will continue to comment on the setting of
monetary policy and its relationship with other
policies. The Reserve Bank will continue to consult
with the Government on those settings. But all
changes to monetary policy will be decided by the
Bank Board and announced by the Governor after
consideration of what is needed to achieve the
Government's mandate.
The Coalition has reversed our previous policy and
we will not abolish the Prices SurveiIIance
Authority (PSA) during our first term of
government. The PSA will be provided with
additional resources during the implementation
phase of the indirect taxation reform program and
will re-order its priorities to make sure that
businesses pass on the benefits of the tax reform to
their customers by way of lower prices.

2. LABOUR MARKET REFORMS TO

ACHIEVE MORE PRODUCTIVE
AND REWARDING WORKPLACES
Returning responsibility for good industrial
relations to the workplace where it belongs is
essential if the productivity and competitiveness of
enterprises are to be improved and wage rises are to
reflect productivity gains. Our habit of pushing
responsibility for industrial relations onto legalistic
tribunals has done enormous damage to the
Australian workplace.
The flexibility in employment conditions which will
be achieved will greatly expand job opportunities.
After years of hostility, the Hawke Government has
now conceded the need for enterprise bargaining which has been Coalition policy for most of the past
decade. Labor has adopted much of our rhetoric, but
little or none of our substance. Labor cannot deliver
the dramatic change that is needed because of its
traditional commitment to the existing centralised
system which gives priority to its trade union mates
and its allies in the wages bureaucracy.
We will encourage employers and employees to
negotiate together at workplace level to maximise
pay and productivity. The clear purpose of our
reforms is to achieve mutual gains for both sides in
the current industrial relations battlefield by turning
today's opponents into tomorrow's partners,
Power Brewing in Brisbane and the Shepparton
Preserving Company (SPC) in rural Victoria point to
what our proposed reforms can achieve. They have
demonstrated the attitudes which are driving more
38

and more workers to opt for arrangements . outside

the centralised wage-fixing system. Both
enterprises have operated outside the existing
industrial relations system. Both have been
criticised by the industrial relations "club". But
Powers' workers earn over $9,000 a year more than
those on the brewing industry award and SPC
workers have jobs that would otherwise have
disappeared.
To achieve this goal, employers and employees will
be offered the choice of leaving the existing
industrial relations system and moving to a system
which allows individual agreements on workplace
pay and performance (subject to specific minimum
standards on wages and conditions). There will be
choice, not compulsion, about opting out of the
present award system into an enterprise-based
agreement. This will require agreement from both
employer and employee.
There should be no further national wage cases.
Wage increases in the future should be based on
improvements in productivity and performance, and
that means returning negotiations over wages and
conditions to the enterprise level.
"Opting- out" of the present industrial system does
not mean replacing the rule of law with the law of
the jungle. Quite the contrary - it means submitting
to the ordinary law of the land enforced by proper
courts rather than existing in a special . jurisdiction
where Commissioners' rulings are sometimes
ignored with impunity.
Trade unions will be welcome within the new
system but they will not be allowed to enforce
"closed shops" or to demand compulsory
membership. Unions, like other representative
groups in society, should earn their membership by
winning, and keeping, the confidence of their
members.
We will encourage, therefore, the formation of
workplace unions and abolish the automatic
deduction of union dues.
The Industrial Relations Commission will have no
direct role in setting the new enterprise-based
agreements but all employees, whether or not they
choose to operate outside the existing award system,
will remain protected by IRC-set minimum wages as
well as occupational health and safety provisions.
A Hewson Government won't simply stand on the
sidelines and urge others to greater effort. Where the
Federal Government is an actual employer, we will
attempt to lead by example. In particular, we will
i mplement greater decentralisation, flexibility and
accountability in the Federal Public Service by
giving the heads of government departments and
businesses a total wage budget to be administered in
the way they consider will most effectively achieve
their corporate goals and their public responsibilities. They will be able to determine the pay
levels of their employees and the structure of their
organisations in the most efficient way.
Fightback! - Its your Australia

In addition to building a policy framework that will

create new jobs, we have also developed programs
aimed at getting those currently unemployed back to
work.
Policies to help the unemployed find work and
obtain training for new jobs are an essential part of
our strategy. To give the unemployed hope, dignity
and a real chance to move off the jobless scrap-heap,
the Coalition will dispense with the rigidities in
employment conditions which now threaten to
create a permanent army of jobless.
We will:
offer the unemployed earlier access to
programs which combine employment and
training (e.g. the AUSTRAIN scheme on
which details are provided in the policy paper
on Genuine Assistance for the Unemployed in
the Supplementary Papers);
offer a range of positive workplace alternatives
for those genuinely unemployed after nine
months;

abolition of the training levy;

abolition of lump sum superannuation tax;

a new national savings strategy based on
improved superannuation arrangements and a
Tax Free Savings scheme;

reductions in capital gains tax;

phase-out of customs duty over this decade;

abolition of the coal export duty;

introduction of a broad-based Goods and

Services Tax compensated by income tax cuts
and benefit increases.
(A) LOWER, FAIRER TAXES - PERSONAL
INCOME TAX
What's Wrong With Labor's Personal Income

Tax System
The Hawke Government's personal tax system has
four major failings:
The overall burden of personal tax is excessive.

combine the Department of Social Security and

the Commonwealth Employment Service and
devolve responsibility for administering
employment and training programs from
government agencies to Local Employment
Boards with an increased investment on the
community;
significantly increase the funds available to
voluntary community based organisations,
requesting an increased emphasis on training,
and refocussing our efforts on community
based programs such as Skillshare;
provide an additional $520 million for TAPE
until the year 2000 to fund growth, opportunity
and world class skills;

a limited, community based work for benefits

scheme;

work with the States to ensure that "at risk"

young people have available appropriate
assistance to them to make the transition from
school to further training and into employment.

3. LOWER, FAIRER TAXES

The major elements of the Coalition's tax reform
package are:

Australia has the fourth highest personal tax

burden of the 24 OECD countries, and well
above the average of the seven major industrial
countries, and of course, significantly greater
than in the newly industrialised countries of
our region.
The tax rates significantly reduce the incentives
to work.
Workers face high tax rates at low income
levels and the situation has worsened
dramatically under the Hawke Government.
A person on male average weekly earnings now
faces a marginal tax rate of 38 per cent (or
39.25 per cent including the Medicare levy) which is an increase from just 30 per cent over
the life of the Hawke Government. More than
50 per cent of all Australian taxpayers now face
an effective marginal tax rate of 39.25 per cent
or higher. For every extra dollar they earn,
almost 40 cents or more disappears into the
pockets of the Federal Government.
The Government has increased its revenue by
billions of dollars through stealth, by hanging
onto revenue generated from "bracket creep".

record cuts in personal income tax focussed on

low and middle income earners;

The Hawke Government has used "bracket

creep" to reap a hidden tax bonanza estimated
at $22 billion over its term of office.

abolition of wholesale sales tax;

The present tax system discourages savings.

abolition of payroll tax;

abolition of fuel excise;

Fightback? - It's your Australia

Savings are discouraged because income

earned from savings is taxed twice. In the case
39

of a wage and salary earner, income is earned

and taxed. If savings are made from after-tax
income, the interest income earned will then be
taxed. Thus income from savings incurs
double taxation.

The Liberal National Alternative

A Liberal/National Government will:
implement the largest personal tax cuts in
Australian history:
we will slash personal income tax by about
30 per cent - that is, by $13 billion;
we will raise the tax free threshold from
$5,400 to $7,000 with the result that at least
another 320,000 low income earners will
now pay no tax;
we will cut marginal tax rates across the
board, especially targeted at middle income
earners;
95 per cent of taxpayers will face a

marginal rate of 30 cents or less: under

Labor, over a half of all taxpayers face a
rate of 38 cents or more, up to 47 cents;
average Australians will be able to double
their taxable income and still pay a
marginal tax rate of 30 cents;
when our reforms are implemented,
taxpayers will be able to earn up to $75,000
and pay a lower rate of marginal tax than
they currently pay if they earn more than
$20,700;
implement a new tax free savings scheme
whereby, for taxpayers with incomes up to
$50,000, interest income on new saving will be
tax free;
increase the corporate tax rate to 42 cents to
align it with the significantly reduced top
marginal personal income tax rate, and thus
eliminate tax avoidance through incorporation;
+ guarantee the return of revenue from tax
bracket creep to taxpayers;
provide tax rebates of up to $100 to $400 for
low to middle income earners who take out
private health insurance, with up to $400 in
additional incentives for persons over 65;
provide an additional tax rebate for persons
over 65 who earn up to $12,000 (single) and
$14,500 (married) and thus effectively cover
the full cost of private health insurance which
entitles access to private Deus and the doctor of
choice;

40

encourage higher income earners to take out

private health insurance by adding a surcharge

to the Medicare levy for families with incomes

above $50,000 and singles above $40,000 who
do not have private health insurance;

increase the Dependent Spouse Rebate for

eligible families with children to $1,679;

implement a major new initiative to ensure that

low income earners are more than compensated
for the impact of the Goods and Services Tax
through a Goods and Services Tax Credit
system;
adjust specific thresholds and allowances under
the Income Tax Act for the impact of the
Goods and Services Tax;

increase Zone Rebates by at least 25 per cent;

implement a range of other changes affecting

personal tax such as a new superannuation tax
rebate and the abolition of the lump sum tax, a
new tax free personal savings scheme, a lower
and revised capital gains tax and a reduced
fringe benefits tax.
Tables 6.1 to 6.3 on the following pages show the
present and proposed personal income tax rate scales
and threshold level.
(B) LOWER, FAIRER TAXES - ABOLITION
OF WHOLESALE SALES TAX AND
INTRODUCTION OF GOODS AND
SERVICES TAX
What's Wrong With Labor's Wholesale Sales
Tax

The wholesale sales tax actively penalises

manufacturing production and all exports, is an
administrative nightmare and falls most heavily on
the poorer sections of the community.
There are six major flaws:
Its Narrow Base
In 1989/90 the total wholesale sales tax base
represented less than 40 per cent of the value of
private final consumption expenditure.
Anomalies and inconsistencies abound making
the administration of the tax very unwieldy.
The main distortion is that services are not
directly taxed. Their omission is clearly
regressive because services (such as restaurant
meals, taxi fares and hair styling) are consumed
disproportionately by the well-off.
The wholesale sales tax falls mainly on
manufacturing industries - industries which
must become internationally competitive if we
. are to begin to trade our way out of our huge
foreign debt and create sustainable jobs.
Fightback! - It's your Australia

TABLE 6.1
NEW PERSONAL INCOME TAX SCALES

Present Tax
Scales

0-$ 5400

Proposed Tax
Scales from
1 Oct 1994
$

0-$ 7000

Proposed Tax
Scales from
1 Jan 1996
$

0-$ 7000

$ 5401-$20700

20

$ 7001-$20700

16.2

$ 7001-$20700

16.2

$20701-$36000

38

$20701-$50000

30

$20701-$50000

30

$36001-$50000

46

$50001 & over

45

$50001-$75000

36

$50001 & over

47

$75001 & over

42

This means, in practice, that all taxpayers will enjoy substantial tax cuts (see

Table 6.2).

Fightbacld - It's your Australia

41

TABLE 6.2
TAX SCALES FROM OCTOBER 1994 (a)
TAX PAID

INCOME
$

Proposed
Scale (II)
$

Present
Scale(I)
$

(a)

42

DIFFERENCE
(I - II)
$

PER CENT
REDUCTION
IN TAX

PER
WEEK
GAIN
(a)
$

GAIN
IN
AFTER
TAX
INCOME
(%)

7000

320

320

100.00

6.1

4.8

8000

520

162

358

68.9

6.9

4.8

9000

720

324

396

55.0

7.6

4.8

10000

920

486

434

47.2

8.3

4.8

15000

1920

1296

624

32.5

12.0

4.8

20000

2920

2106

814

27.9

15.6

4.8

25000

4694

3509

1185

25.2

22.7

5.8

30000

6594

5009

1585

24.0

30.4

6.8

35000

8494

6509

1985

23.4

38.1

7.5

40000

10714

8009

2704

25.2

51.9

9.2

45000

13014

9509

3504

26.9

67.2

11.0

50000

15314

11009

4304

28.1

82.6

12.4

55000

17664

13259

4405

24.9

84.5

11.8

60000

20014

15509

4505

22.5

86.4

11.3

65000

22364

17759

4605

20.6

88.3

10.8

70000

24714

20009

4705

19.0

90.2

10.4

75000

27064

22259

4805

17.8

92.1

10.0

80000

29414

24509

4905

16.7

94.1

9.7

85000

31764

26759

5005

15.8

96.0

9.4

90000

34114

29009

5105

15.0

97.9

9.1

95000

36464

31259

5205

14.3

99.8

8.9

100000

38814

33509

5305

13.7

101.7

8.7

Annual figures rounded to nearest dollar. Weekly figures rounded to nearest ten cents.
Weekly conversion factor calculated by using the increase of 365 days divided by 7.

Fightback! - It's your Australia

TABLE 6.3
TAX SCALES FROM 1 JANUARY 1996 (a)
INCOME
$

TAX PAID
Present
Scale (I)
$

(a)

DIFFERENCE
(I - II)
$

Proposed
Scale (II)
$

PER CENT
REDUCTION
IN TAX

PER
WEEK
GAIN
(a)
$

GAIN
IN
AFTER
TAX
INCOME
(%)

7000

320

320

100.00

6.1

4.8

8000

520

162

358

68.9

6.9

4.8

9000

720

324

396

55.0

7.6

4.8

10000

920

486

434

47.2

8.3

4.8

15000

1920

1296

624

32.5

12.0

4.8

20000

2920

2106

814

27.9

15.6

4.8

25000

4694

3509

1185

25.2

22.7

5.8

30000

6594

5009

1585

24.0

30.4

6.8

35000

8494

6509

1985

23.4

38.1

7.5

40000

10714

8009

2704

25.2

51.9

9.2

45000

13014

9509

3504

26.9

67.2

11.0

50000

15314

11009

4304

28.1

82.6

12.4

55000

17664

12809

4854

27.5

93.1

13.0

60000

20014

14609

5404

27.0

103.6

13.5

65000

22364

16409

5954

26.6

114.2

14.0

70000

24714

18209

6504

26.3

124.7

14.4

75000

27064

20009

7054

26.1

135.3

14.7

80000

29414

22109

7305

24.8

140.1

14.4

85000

31764

24209

7555

23.8

144.9

14.2

90000

34114

26309

7805

22.9

149.7

14.0

95000

36464

28409

8055

22.1

154.5

13.8

100000

38814

30509

8305

21.4

159.3

13.6

Annual figures rounded to nearest dollar. Weekly figures rounded to nearest ten cents.
Weekly conversion factor calculated by using the increase of 365 days divided by 7.

Fightback! - It's your Australia

43

Multiple Rates

The Liberal/National Alternative

The wholesale sales tax applies multiple rates

(10, 20 and 30 per cent) to a range of goods,
resulting in significant classification problems
and costly administration and compliance.

We will introduce a broad based, single rate, 15 per

cent Goods and Services Tax on 1 October 1994.

There is no rhyme or reason why wholesale

sales tax is levied at different rates. Soft drinks
are taxed at 20 per cent but flavoured milk at
only 10 per cent; garbage bags attract 10 per
cent tax but cling wrap 20 per cent; and
children's toys are taxed at 20 per cent but
babies teething rings at only 10 per cent.
Business Inputs Are Taxed
The effect of taxing business inputs - and of
imposing different rates on different inputs distorts the choice of production processes and
the choice of products produced.
In its 1985 Draft White Paper on taxation
reform, the Government recommended that
intermediate goods should not be subject to a
consumption tax - except in the last resort case
where it is impracticable to tax final
consumption of a good directly.
Taxes Exports And Favours Imports
The wholesale sales tax taxes exports and
favours imports. It saddles Australian
manufacturers with a tax system which actively
disadvantages them on world markets by
taxing inputs which, under most other indirect
tax systems, are tax free.
It Is Regressive
The burden of the wholesale sales tax falls
most heavily on low income earners. For
example, the wholesale sales tax paid by
families with children on the lowest 10 per cent
of incomes is 4.2 per cent of their income
compared with 2.9 per cent for families in the
highest 10 per cent of incomes.
Lack Of Transparency
.. The wholesale sales tax is a hidden tax.
The Government has systematically and
deliberately increased the wholesale sales tax
by nearly 60 per cent in real terms since it came
to power.
Most Australians are unaware of these
increases and many are not even aware that the
wholesale sales tax exists. Goods on which the
wholesale sales tax is paid do not bear any sign
in supermarkets so consumers are often not
aware of which goods are taxed directly, let
alone indirectly.
44

The first advantage of the Goods and Services Tax is

that it eliminates the faults associated with the
wholesale sales tax - faults that the present
Government detailed at length in its abortive
campaign to introduce a broad-based consumption
tax in 1985.
The second advantage of a Goods and Services Tax
is that it will, by removing distortions and
simplifying administration, increase GDP by up to
one per cent or add a permanent $4 billion to our
national economy. This means a lasting gain in jobs
and more potential for future growth. Making our
indirect tax system efficient means that every other
improvement will work better.
Third, the introduction of a Goods and Services Tax
means that our exporters will have a huge tax burden
lifted from them - putting them on the same tax
footing as most of our competitors who already
exclude exports from indirect tax.
Fourth, moving from the narrow-based, variable rate
and non-rebateable wholesale sales tax to a broadbased, single rate and rebateable Goods and Services
Tax will bring Australia into line with the
industrialised world.
Australia stands out from most other industrialised
countries in lacking an efficient and well-designed
goods and services tax. Twenty one of the 24 OECD
nations have value added taxes - except for the
United States (which has various State retail taxes);
Switzerland (which has a retail tax); and Australia
(which is burdened by an archaic, inefficient and
inconsistent wholesale sales tax).
And fifth, no government is serious in the fight
against tax evasion without moving to tax spending
more and income less. Those who earn undeclared
cash will pay tax when they spend, if not when they
earn. In addition, a Goods and Services Tax will
ensure that foreign tourists help to pay for the
infrastructure they use.

(i) What is a Goods and Services Tax?

A Goods and Services Tax is a tax charged on the
supply of goods and services in Australia. It is a
"value added" tax levied at all stages of production
and distribution. At every stage, the relevant
business pays tax only on its "valued added".
The Goods and Services Tax is charged every time
goods or services are supplied in the course of
business. Tax paid is collected by the business
which supplies the goods or services and is
forwarded to the Taxation Office at the end of fixed
periods. But the Goods and Services Tax is not a tax
Fightback! - It's your Australia

on business or its profits. It is the final consumer

who ultimately pays the Goods and Services Tax.
In addition, consumers and business will be
compensated for this change by the abolition of the
existing wholesale sales tax, payroll tax, petrol
excise, the training guarantee levy, reduction in
customs duties and substantial income tax cuts,
together with various social security measures.

pay tax to itself simply involves unnecessary

"churning" and paperwork. Making the consumers
of Government services pay tax on those services
amounts to a "tax on a tax". The Coalition has
decided not to tax the provision of non-commercial
activities by government. Therefore, the Goods and
Services Tax will not be imposed on top of local
government rates.
In 1985, the Tax White Paper concluded that:

(ii) Exceptions
Some goods and services will be wholly free of tax.
Such goods and services are termed "zero rated"
which means that no Goods and Services Tax is paid
by the final consumer and Goods and Services Tax
paid on business inputs at earlier stages in the
production and distribution is fully rebateable.
Exports

Exports are zero-rated under all Goods and Services

Tax systems. This is, in fact, one of the key reasons
for introducing the Goods and Services Tax in
Australia and will substantially boost the
international competitiveness of Australian industry.

"Services provided without charge by

governments (such as public administration and
defence) obviously cannot be subject to [Goods and
Services Tax]."
Welfare, Religious And Charitable Institutions

Welfare, religious and charitable institutions provide

services similar to those provided without charge by
government which, as noted by the Hawke
Government in 1985, "...obviously cannot be subject
to [Goods and Services Tax]." These institutions are
not now directly subject to sales tax (although they
pay wholesale sales tax indirectly on some of the
goods they buy). The Liberal and National Parties
will give them genuine tax-free status.

Education and Health

"It is not possible to apply a [Goods and

Services Tax] directly to publicly-provided
education services as there is no direct charge.
Private education services could be included.. .but to
do so would...be considered highly arbitrary and
discriminatory."

Sale Of A Business As A "Going Concern"

The sale of a business as a "going concern" is zero
rated as a matter of commonsense. The transaction
costs involved in implementing the Goods and
Services Tax on businesses, where in reality the
purchaser will end up having the Goods and
Services Tax rebated back to them as a Goods and
Services Tax credit almost straight away with no
gains to the government, necessitates zero rating in
this case.

Again, as the Hawke Government said in 1985:

(iii) Partial exceptions

The Hawke Government's 1985 Draft White Paper

on the Reform of the Australian Taxation System
concluded that:

"Health services also receive substantial

government funding and the consumer bears directly
only a minor part of the total cost."
To impose a Goods and Services Tax on education
and health services would create a significant bias
against private providers.
Coalition policy should see a fall in the absolute cost
of health and education services. The price of
services should fall because we will remove
completely any sales tax from both education and
health service provision. The current effective sales
tax on medical care and health expenses is around
1.4 per cent. The Coalition will abolish this tax and
not impose any tax in its place. The abolition of the
fuel excise and other taxes will also lower the costs
of health and education services. We estimate that
the price of health and education services will fall by
up to one per cent.
Government Services

Some goods and services will be free of tax on their

final sale but will still be subject to Goods and
Services Tax at intermediate stages. Such goods and
services are termed "exempt" - they are exempt from
tax on their output value but are fully taxed on their
inputs.
Residential Rents, Residential Construction And
Other Construction

No OECD country imposes a Goods and Services

Tax on rental payments. As the Hawke
Government's 1985 Draft White Paper noted: "The
[Goods and Services Tax] is a tax on consumption
and so should logically fall on the services flowing
from buildings rather than the purchase of the
buildings themselves. That is, the tax should fall on
actual rent payments in the case of tenants and
imputed rent payments in the case of owneroccupiers. The administrative and technical
problems of taxing imputed rents are such as to rule
out this approach."

No country (except New Zealand) imposes a Goods

and Services Tax on non-commercial services As the Hawke Government's 1985 Draft White
Paper noted, it would be difficult to distinguish
provided by Government. Having a Government
Fightbackl - It's your Australia

45

between building materials for residential housing

and building materials for commercial buildings and
public works. Therefore, all building materials will
be input taxed.
About 50 per cent of the actual cost of building a
home - labour plus the builder's margin - is excluded
from input taxing.
In addition, a first home owners scheme (FHOS)
will provide first home buyers earning up to $40,000
a year household income with $2,000 to offset the
price effect of the Goods and Services Tax. Those on
higher incomes will be compensated by large
personal income tax cuts.
Financial Services
No country in the world imposes a Goods and
Services Tax on financial services because financial
institutions charge for their services through the
margin between their deposit and lending rates.
Because there is no readily identifiable value for
these services, they will be exempt from the Goods
and Services Tax (or input-taxed only).
Gambling And Lotteries
Gambling and lotteries are already subject to very
high State taxes. Given the practical difficulties in
defining what part of gambling activities should be
taxed and in lieu of abolishing those State taxes and
charges, gambling and lotteries will be input taxed
only.

(iv) Compensation for the Goods and

Services Tax
The introduction of a Goods and Services Tax will
enable the abolition of four major taxes - wholesale
sales tax, payroll tax, petroleum excise and customs
duties - and help to fund large cuts in personal
income tax.
The abolition of these taxes means that the price
effect of the Goods and Services Tax will be far less
than 15 per cent. As the Table 6.4 on the following
page demonstrates, we calculate that the abolition of
taxes raising about $22 billion a year and the
imposition of a tax raising about $30 billion should
produce a one-off CPI effect of 4.4 per cent.
To compensate for this one-off price effect, we will:

provide all taxpaying Australians with

substantial income tax cuts;

raise the tax-free threshold from $5,400 to

$7,000;

increase age, service and other pensions by 8

per cent;

increase other benefits by 6 per cent;

provide retirees over age 60 who have annual

taxable incomes under $30,000 with lump sum
46

compensation up to $2,500 for the effect of the

Goods and Services Tax on their savings;
provide persons whose incomes are too low to
be adequately compensated by tax cuts but who
do not receive a full pension or other benefit
with a Goods and Services Tax Credit based on
taxable income and the one-off price effect of
the tax;
provide everyone over 65 earning less than
$50,000 a year with a Pharmaceutical Benefits
Concession Card (PBCC) - worth, on average,
$5 a week;
provide first home buyers with a cash benefit of
$2,000 for the purchase of new and established
housing.
As a general rule, compensation for the introduction
of the Goods and Services Tax is best provided
through extra cash. Exempting food, for instance,
makes less sense than providing compensation for
price increases through the social security and
personal tax systems.
As Bureau of Statistics data shows, the richest 10
per cent of Australian society spend about three
times as much on food as the poorest 10 per cent. To
make food tax free, therefore, would be equivalent to
a $3 tax cut for the better-off compared to a $1 tax
cut for the less-well-off.
(C) LOWER, FAIRER TAXES - CAPITAL
GAINS TAX
What's Wrong With Labor's Capital Gains Tax

The taxation of capital gains is an essential element

of any taxation system which continues to rely on
income as a taxation base. Without it, there would
be an incentive for some people to take their
remuneration in the form of capital gain rather than
income and escape their tax obligations. Without it,
there would be a strong incentive to speculative
property and share transactions.
However, Labor's application of the capital gains
tax since 1985 has been far too sweeping and
administratively difficult, particularly for small
investors. It has been fixed at too high a rate and it
has penalised many thousands of Australians who
have put their efforts into building up a business or
farm to support their families and provide for their
retirement.
The most counter-productive aspects of Labor's
capital gains tax are:
80 per cent of the goodwill value of a business
(up to a ceiling of $1 million) is liable to capital
gains tax - a significant deterrent to working
hard to build up a business;
the application of capital gains tax to assets
sold in the process of expanding a business - a
major disincentive to growth and employment;
and
Fightback! - It's your Australia

TABLE 6.4
CUMULATIVE PRICE EFFECT OF
TAX REFORM

One-Off Impact of CPI

Individual
Measure

Cumulative

(%)

Total.
(%)

15% GST on Private Final Consumption

15.0

15.0

less impact of adjustments made to

de rive GST base

-3.9

less impact of WST abolition

-4.3

6.8

less impact of payroll tax abolition

-0.9

5.9

less impact of petrol excise abolition

-1.3

4.6

plus net impact of faster phase-out of

Customs Duty and increases in Tobacco
Excise

+0.1

4.7

Net impact of Indirect Tax Reform

excluding Tobacco Excise Increases

-0.3

4.4

the application of the capital gains tax and its

administrative burden especially to very small
investors;
Because only tax experts can understand the capital
gains tax, taxpayers who make small capital gains
either have to employ an accountant or risk breaking
the law.
The Liberal/National Alternative
The Liberal/National reform package will make
major changes to the capital gains tax system to
provide significant tax relief, incentive, and
retirement benefits for small business people,
farmers and small investors. We will do so in the
following ways.
Capital gains tax will continue to apply, but at
the significantly lower marginal income tax
rates, to real capital gains on assets bought after
19 September 1985.
To reduce paperwork and simplify the system,
there will be an option to pay capital gains tax
at a flat rate of 30 per cent on nominal gains on
assets held for five years or longer.
Capital gains of less than $3,000 made by an
adult individual in each year are to be exempt
from tax.
Relief from capital gains tax on the sale of
goodwill will be provided at the following
rates: 50 per cent relief up to $500,000; 30 per
Fightback! - It's your Australia

11.1

cent between $500,000 and $1,500,000; 10 per

cent between $1,500,000 and $2,000,000; and
no additional relief above that figure.
Abolish capital gains tax on the sale of a
business by retirees aged 60 or more on gains
up to the value of ten times average annual
earnings (currently around $300,000).
Abolish . capital gains tax on the sale of a
business, up to the value of ten times average
annual earnings, provided the funds are placed
in an Approved Deposit Fund until retirement.
Full relief from capital gains tax will be
provided on the roll-over of a business into a
like business where the disposal price does not
exceed $5 million. This benefit will be
available once every five years. The income tax free discount on shares issued
to or bought by employees through an
employees' share ownership scheme will be
increased to $500.
Greater encouragement of employee share
ownership is an important part of our
privatisation program; the value of shares
which may be issued under Employee
Participation Schemes will be extended from
$2,000 to $5,000 with a discount of up to $500
per year tax free but shares must be held for
more than three years before they are exempt
from capital gains tax.

47

(D) LOWER, FAIRER TAXES - PAYROLL

TAX

attract Goods and Services Tax but business users

will be able to gain a refund in the usual way.

What's Wrong With Labor's Payroll Tax

For ordinary motorists the pump price of petrol,

after the abolition of fuel excise and the introduction
of Goods and Services Tax, should fall by about 19
cents a litre. This should save the average family
around $11.40 in filling the 60 litre tank of the
average family car. For business users, the Goods
and Services Tax rebate means an effective cut of
over 25 cents a litre on petrol and diesel.

Payroll taxes discourage employment and raise

consumer prices. Over 3.5 million jobs (or over 60
per cent of jobs in the private sector) are subject to
payroll tax.
Australia relies on payroll taxes much more than
other comparable countries. In 1989, payroll taxes
constituted 5.7 per cent of total tax revenue
compared to an OECD average of just 1.1 per cent.
Fourteen of the 24 OECD countries have no payroll
tax at all.
Payroll tax is another bureaucratic nightmare which
applies at different rates in different States and even
applies at different rates within the same State to
different employers.
The Liberal/National Alternative
A Hewson Government will use part of the proceeds
of the Goods and Services Tax to fund the abolition
of existing State and Territory payroll taxes. Each
State will receive an increase in Commonwealth
grants to offset foregone payroll tax revenue. This is
a reform which will significantly boost sustainable
job growth.
(E) LOWER, FAIRER TAXES - FUEL,
TOBACCO AND ALCOHOL EXCISE
What's Wrong With Labor's Excise
Fuel excise affects the cost of every product which is
transported by road. It is one of the most distorting
taxes in the economy, especially because substitutes
such as LPG, coal and electricity are not taxed at all.
In a 1986 study of fuel excise, the Industries
Assistance Commission identified three problems
with taxes on intermediate products: they penalise
the production of goods where increased costs
cannot be passed onto the consumer; they distort the
consumption of goods where higher costs can be
passed on; and they distort production decisions by
encouraging substitution of other inputs. The IAC
concluded that a broad-based consumption tax
should replace fuel excise and other indirect taxes.
In addition, fuel excise has become a major boost to
consolidated revenue. Motorists, in particular, have
become a soft target for governments seeking a
relatively painless way of raising revenue. The
Federal Government in 1990/91 collected around 25
cents per litre of petrol and diesel to the grand total
of more than $6 billion in 1990/91 dollars.

In addition to Goods and Services Tax, a Hewson

Government will increase excise on tobacco by 25
per cent which will increase the price of a packet of
25 cigarettes by about 90 cents. Tobacco use costs
the community about $1 billion every year in
smoking-related medical expenses and smokingrelated loss of output.
A Hewson Government will not make changes to
excise on beer and other alcoholic beverages. The
CPI price impact of the Goods and Services Tax
reforms involves an average price increase across all
alcoholic beverages of about 3 per cent.
Automatic indexation of excise on alcohol and
tobacco will be terminated.
(F) LOWER, FAIRER TAXES - TAXES ON
BUSINESS
What's Wrong With Labor's Taxes on Business
The wholesale sales tax, payroll taxes, excise duties,
the training levy, the capital gains tax and other
taxes add around $15 billion to business costs
directly, and perhaps an additional 20-30 per cent
indirectly through the cascading effect of some of
these taxes.
There are additional problems, however, with the
current system of business taxation.
It encourages debt over equity finance and
discourages large investments with long lead
times such as the Very Fast Train project and
the Alice Springs to Darwin rail link).
The capital gains tax discourages investment in
new businesses and the expansion of existing
ones.
The rate of company tax is set considerably
lower than the top marginal personal tax rate,
thus encouraging incorporation to limit tax
liability.
The compulsory training and superannuation
levies are counter-productive to lowering
inflation and creating jobs.

The Liberal/National Alternative

A Hewson Government will abolish all Federal
excise on refined petroleum products. Fuel will
48

The Liberal/National Alternative

The business sector will benefit directly from the tax
measures in the Liberal/National reform package.
Fightbackl - It's your Australia

Taxes on business will be cut by at least $20 billion.

Most importantly, we will:

abolish the $9.4 billion wholesale sales tax;

abolish the $5.8 billion payroll tax;

abolish the $6.6 billion excise on petroleum

products (about 55 per cent of which falls on
business);

abolish effectively all $3.3 billion of customs

duties;

As with other sectors, the business sector will he

expected to contribute to, as well as benefit from, the
reform process under a Liberal/National
Government. We are also committed to bringing the
corporate tax rate into alignment with the top
personal marginal tax rate.
Measures Against Tax Avoidance And Evasion
This package, in its totality, constitutes a systemic
assault on tax avoidance.

rebate Goods and Services Tax paid on most

business inputs, including businesses
competing with imports;

Reducing the overall burden of taxation and

making the system fairer will promote greater
compliance.

reduce the tax on exports by $1.7 billion.

Moving the emphasis of tax away from earning

and on to spending will further subject people
who operate in the black economy to their fair
share of tax.

In addition, the Liberal and National Parties propose

to implement a range of other measures to reduce
cost disadvantages to the business sector:

our overall reform package dramatically lowers

many business costs by 20 to 50 per cent;

the revised and lower capital gains tax system

will permit greater access to roll-over relief and
make additional allowance for goodwill;
the coal export duty will be abolished;

the training guarantee levy, which is in effect

an extra tax on employers, will be abolished;

the level of compulsory employer contributions

to employee superannuation, in place at the
time of the next election, will be retained but
there will be no further compulsory increases.
Further increases will be on the basis of choice
and incentive, rather than Labor's compulsion;
we will review the present depreciation
arrangements to help Australian business to be
able to match best international practice;
company tax deductions for research and
development costs will continue from July
1993 at 125 per cent, but we will ensure strict
measures to guard against abuse and we will
promote new R&D links between industry and
universities;
the fringe benefits tax will be reduced
significantly and loop holes eliminated through
the alignment of the corporate and top personal
tax rate.
These tax changes are also to be seen against the
background of the other elements of our reform
agenda designed to reduce or eliminate major cost
disadvantages to business (e.g. on the waterfront, in
utilities, telecommunications, aviation, shipping,
land transport, development approval processes,
training and others).
Fightback! - It's your Australia

Aligning the top rate of personal income tax

with the corporate tax rate at 42 per cent will
eliminate the incentive for high income earners
to avoid tax by incorporation.
Abolishing the wholesale sales tax, which
because of its complexity is open to abuse, and
replacing it with a Goods and Services Tax will
introduce more consistency and simplicity.
Our changes to superannuation, described later,
will reduce the ability of high earners to use
superannuation as a tax shelter.
The Liberal/National tax package is an essential
ingredient in the total reform package outlined in
this document. The tax reforms will "oil" every
other change we propose to make.
Our tax reforms will also help to make workplace
bargaining effective, as workers take home more of
their productivity gains. They will reduce the cost of
delivering health and education services. And they
complement our policy to promote saving across the
board.

4. AUSTRALIA AS A FINANCIAL
CENTRE
Australia has the potential to emerge as the second
most important financial centre in the Asia/Pacific
region by the year 2000, behind Tokyo but ahead of
Singapore and Hong Kong.
An excellent start has been made with the
deregulation of the financial sector in the late 1970s
and early 1980s, although the process is not yet
complete and some important mistakes were made.
The Coalition is committed to finishing this process
and ensuring that our finance industry takes its place
as another significant export earner. Several steps
are essential:
49

Lift restrictions on foreign bank entry subject

to entrants being able to satisfy the Reserve
Bank of Australia's prudential standards;.
Allow foreign banks to operate branches and
not continue to require them to operate as
subsidiaries - a change which is absolutely
fundamental to ensuring maximum effective
competition.
Allow holders of bank licences not to be
formally required to offer the full range of bank
services - it is important that new entrants be
permitted to specialise and diversify if the
damaging concentration on asset growth,
which occurred during the 1980s is to be
avoided in the 1990s.
Establish an effective national system of
prudential supervision - not re-regulation - both
to underwrite confidence in the system and to
send clear messages to investors about the
relative performance of different institutions
Review and reform the taxation of financial
transactions including swaps, options and other
financial derivatives. This has been an
appalling area of neglect in the 1980s and the
Coalition proposes to act decisively to clear-up
existing uncertainties concerning the tax
treatment of these various financial instruments
by legislating, inter alia, to introduce tax
timing rules which better align with accepted
accounting principles. The Coalition will also
monitor the relative tax position of Australian
financial institutions in the context of the
proposed further development of the financial
sector in Australia.

To boost national savings, those who already save

must save more or those who do not save must start
saving. An effective national savings scheme,
therefore, means giving low and middle income
earners a reason to save rather than spend.
It is not enough to force people into superannuation
which may just shift savings from one form into
another. This explains why, notwithstanding award
superannuation and superannuation tax breaks,
Australia's household savings ratio has fallen over
the past decade.
To achieve an overall boost in savings, the rules
must encourage people to change their attitudes to
saving. We must replace a spending culture with a
savings culture. The greater self-reliance that will
be required as a result of our better targeting of
social welfare spending is part of our strategy to
encourage savings.
A Hewson Government will impose tight discipline
on public sector spending. But we will meet the
major challenge to rebuild private sector savings
through the following initiatives:

a commitment to price stability and public

sector savings;

the introduction of the broad based Goods and

Services Tax to shift the balance of taxation
away from income and towards consumption;

revised superannuation concessions to target

incentives to lower income earners (see below);

and a new tax rebate scheme on interest to be

called the Tax Free Savings (TFS) scheme (see
below).

5. A NATIONAL SAVINGS STRATEGY

Our inadequate national savings are an important
cause of our current economic problems. Although
there is nothing wrong with sustainable borrowing
(indeed, much of Australia's development has
largely been funded by overseas debt), the
borrowing excesses of the last decade have stretched
our capacity to repay.

Superannuation
Right now, the Government taxes income before it
goes into superannuation; it taxes income as it is
earned by superannuation funds; and it taxes
retiree's lump sums. Notwithstanding taxation at
every stage, Australia's current superannuation
arrangements embody a systemic bias to the rich.

This would matter less if Australia's debt had

funded investments which, in the future, would be
able to repay both principal and interest.
Unfortunately, our latest "investment boom" has
funded conspicuous consumption along with
productive investment. The 1980s have left us with
dramatically higher debt but only a marginally
higher capacity to repay.

The 15 per cent tax on super fund earnings provides

a tax subsidy as little as six cents in the dollar for
low income earners but 33 cents in the dollar for
taxpayers on the top marginal rate.

Money can either be saved or consumed. Because

saving generates income, a tax system based on
income tax is inherently anti-saving. Income tax
means that saving attracts double taxation. To this
extent, a move away from reliance on income tax is
unambiguously pro-saving.

One of the inescapable facts driving our retirement

policy is the rapidly rising ratio of retirees to
workers. Therefore, our changes to superannuation
arrangements will encourage people to provide for
their own retirement; ensure that superannuation
incentives apply more equally at all income levels;
and guarantee that superannuation investment really

50

Moreover, the current system allows people to

"double-dip" by spending their lump sum and
subsequently living off the pension.

Figbtback? - It's your Australia

raise the preservation age to 60.

does fund retirement and cannot be used as a shorterterm, tax advantageous way of saving for an
overseas trip or a holiday home.

Tax Free Savings (TFS) Scheme

Our changes will redistribute the existing

superannuation tax break away from the wealthy and
towards low and middle income earners - who will
gain an up-front incentive to invest in
superannuation plus a better retirement payout.

We will implement a new Tax Free Savings (TFS)

scheme whereby interest on new savings, up to a
limit of $1000 a year for single tax payers and $2000
a year for married couples, will attract a rebate of 30
cents in the dollar, whatever their income.

To give all income earners an incentive to invest in

superannuation, we will provide tax concessions for
contributions up to a total of $6000 a year from all
sources. In particular, we will:

6. HEALTH SECURITY

provide a 25 per cent tax rebate for all

taxpayers on the first $6000 of contributions.
Someone on $30,000 a year investing $2000 in
superannuation will receive $500 cash back - as
will someone on $90,000 a year also investing
$2000;
tax employer contributions (up to $6000) in the
hands of the superannuation fund at the
beneficiaries' marginal tax rate, less the 25 per
cent tax rebate;

Medicare's problems include: over-servicing and

less attentive service due to bulk billing;
unacceptably long public hospital waiting lists;
under-use of private hospitals; over-supply of
doctors; and concealment of the true cost of the
health system. In particular, the Medicare system
has created the illusion of "free" health care even
though the Medicare levy now provides for less than
25 per cent of spiralling health costs.

allow individuals to make tax rebateable

contributions for their non-working spouses on
the same basis as for themselves;

Our proposals are designed to keep costs down and

improve the quality of health care. Our changes will
shift some of the cost of health care from the
Government to the individual in a way which will
still ensure universal cover, protect those on low and
middle incomes and retain cost discipline but allow
individuals greater scope to be responsible for their
health care.

allow persons under 35 buying a first home to

withdraw 75 per cent of their accumulated
superannuation from their superannuation fund
subject to repayment over their working lives;

Health services will be zero-rated for the Goods and

Services Tax. This, together with the abolition of
the wholesale sales tax, fuel excise and payroll tax,
will lower the cost of these services.

enhance freedom of choice by allowing funds

managers to provide more flexible pensions
and annuities and by permitting banks to offer
superannuation products;

Our reforms will retain and improve Medicare. They

will: guarantee all Australians access to high quality
health care; reduce waiting lists at public hospitals;
contain the costs of public health care; and restore
the balance between the public and private health
sectors by encouraging individuals to provide for
their own health care through private health
insurance.

abolish the tax on lump sums (and abolish the

existing reasonable benefits limit);
due to the more generous tax regime on
contributions and the removal of the lump sum
tax, we will raise the tax rate on super fund
earnings from 15 to 25 per cent. (However, as
we will retain full dividend imputation, the
effective tax rate should remain under 20 per
cent);
we will retain any level of employer
contributions in place at the time of the next
election but there will be no further compulsory
increases. Further increases will be on the
basis of policies based on choice and incentive,
rather than Labor's compulsion;
cap the amount which can be taken as a lump
sum at ten times average annual full-time
earnings (currently around $300,000);
deem lump sums above $60,000 for the age
pension income tests;
Fightbackf - It's your Australia

The best way to eliminate waiting lists is to ensure

that more people have access to the private health
care system. This will be achieved by increasing the
proportion of people with private health insurance.
We will provide incentives for elderly and low and
middle income earners many of whom already take
out private health insurance.
Those earning less that $12,000 a year will
receive a Private Health Insurance Credit of
$400 a family or $200 for a single person.
Those earning between $12,000 and $20,000 a
year will receive a Credit of $300 a family or
$150 for a single person.
And those earning between $20,000 and
$30,000 a year will receive a Credit of $200 a
family or $100 for a single person.
51

People over 65 who earn less than $30,000 per

year will receive an additional tax credit if they
have private health insurance.
The additional credit for a person over 65
who earns less than $12,000 (single) and
$14,500 (married couple) will be $200
(single) and $400 (married) which will
effectively provide the full cost of private
health cover entitling them to access to
private beds and to the doctor of their choice.
However, we will require single people earning
over $35,000 a year and families earning over
$45,000 a year to take out private health
insurance or pay a Medicare surcharge. For
singles this will be $100 between $35,000 and
$36,600; $200 between $36,600 and $38,000;
$300 between $38,000 and $40,000; and $400
at or above $40,000. For families this will be
$200 between $45,000 and $46,600; $400
between $46,600 and $48,000; $600 between
$48,000 and $50,000; and $800 at or above
$50,000.
The best way to contain costs is to introduce a price
signal for health services. Bulk billing will be
abolished with the exception of the four million
pensioners, health care card holders and the
disabled.
Of itself, this does not entail that patients pay more just that they have to pay their bills before obtaining
a Medicare rebate. In addition, by abolishing the
wholesale sales tax and totally removing medical
expenses from Goods and Services Tax, we will
actually reduce the costs of delivering medical
services.
Instead of introducing a co-payment, we will reduce
the Medicare rebate for non-pensioners from 85 to
75 per cent. In addition, we will allow health funds
to offer partial cover for the "gap" between the
Medicare Rebate and the AMA schedule level. The
remaining 15 per cent will remain the responsibility
of the patient.
in addition, a Hewson Government will grant
Pharmaceutical Benefits Concession Cards (PBCC)
to people aged 65 and over earning less than $40,000
a year (single) and $50,000 a year (married). We
will also allow pharmacies to act as agents for
Medicare, thus significantly improving access to
Medicare for country people.
To further limit the growth of health costs we will
work with the States to institute efficiency reforms
to public hospital systems, including new
accounting systems and management information
systems up to best international practice. We will
maintain control over the numbers of medical
students, monitor the immigration of doctors and
require foreign medical graduates to achieve the
same clinical and theoretical standards as Australian
graduates.
52

These proposals will reshape the Australian health

care system. They will eliminate waiting lists at
public hospitals, put an end to "sausage machine"
medicine from under-paid GPs, and extend the
private hospital system to regional centres.

7. FAMILY ASSISTANCE MEASURES

The family is the place where values of
independence, co-operation, personal responsibility,
tolerance and concern for others are developed. Not
only is the family the chief source of emotional
nourishment; it is also the most important welfare
institution in society.
Personal tax cuts under a Coalition Government will
give a priority to families on incomes between
$20,000 and $50,000.
The Liberal and National Parties will focus Family
Allowance benefits on those families in greatest
need of assistance and significantly increase the
level of assistance provided to those families.
We will double the Family Allowance where family
income is less than $30,000 a year. This means that
low-income families will be better-off by an extra
$20 per child per fortnight for their first three
children and more for subsequent children.
For families earning between $30,000 and $40,000 a
year, we will increase family allowance by 50 per
cent. This means that middle income families will be
better-off by an extra $10 a child per fortnight for the
first three children and more for subsequent
children.
For families earning between $40,000 and $55,000 a
year, Family Allowance (as with other benefits) will
be increased by six per cent to compensate for the
introduction of the Goods and Services Tax.
Table 6.5 on the following page provides the details.
The Dependant Spouse Rebate (DSR) will be
increased from $1379 to $1679 a year for eligible
families with children. For eligible families without
children, it will increase from $1149 to $1204. The
DSR will be phased out from $75,000 for families
with dependent children and from $50,000 for those
without dependent children, at a rate of $1 for every
$4 income.
Families will also be assisted by other reforms under
a Coalition Government..
Eligible families with incomes of less than $30,000
will receive tax credits of up to $400 to assist them
with the cost of private health insurance.
Families will benefit from our superannuation
reforms which, among other things, provide a 25 per
cent rebate on the first $6,000 of contributions and
the abolition of lump sum taxes.
Fightback! - It's your Australia

Abolition of petrol excise will save the average

family around 19 cents a litre or approximately
$11.40 in filling the 60 litre tank of the average
family car.
Our First Home Owners' Scheme will assist low to
middle income earners with a cash benefit of $2,000
to compensate for the Goods and Services Tax
impact on saving for their home.
We will implement a new Tax Free Savings (TFS)
scheme whereby interest on new savings up to a
limit of $2000 per year for married couples will
attract a rebate of thirty cents in the dollar, whatever
their income.
Families will also benefit from the $90 million we
have allocated to help reduce the cost of child care to
Australian families.
The zero-rating of health and education services and
the abolition of the wholesale sales tax, payroll tax
and fuel excise will mean that the cost of delivering
health and education services will be reduced.
Families will also benefit from the Coalition's
commitment to allocate an additional $50 million to
voluntary welfare agencies. Some of these funds
will assist such agencies in providing family care
and family crisis counselling to families currently
suffering from the effects of financial and social
hardship.

8. REDUCTIONS IN GOVERNMENT
WASTE AND INEFFICIENCY
The current size of government imposes a heavy
burden on, and costly intervention in, the lives of
individuals, families and businesses.
The size and cost of government are excessive. Both
will be reduced.
Given the worst recession in sixty years, fiscal
restraint is made even more imperative and, in
combination with a major overhaul of revenue and
expenditure priorities, every area of government
outlays must be scrutinised.
Of total Commonwealth Budget outlays of just over
$100 billion in 1991-92 the Coalition has identified
$10 billion in gross savings although these are offset
by increases in outlays of $6 billion including those
associated with compensation for the Goods and
Services Tax. Net savings are $4 billion.
Every area of government spending has been
examined to eliminate waste and inefficiency.
A broad range of groups in the community will be
affected by the Coalition's spending cuts.
Politicians, industry, public servants, trade unions,
lobby groups and those defrauding the system will
all share the burden of the reductions in expenditure
Fightback! - It's your Australia

in addition to the big-ticket expenditure items such

as defence and social security.
In line with the need for across-the-board restraint,
the cost of Federal politicians to the taxpayer will be
significantly reduced. Members and Senators will
be given a "global" budget. Each Member's global
amount will be based on the size of their electorate,
its location and the Member's Parliamentary duties.
The global limit provided will be 10 per cent lower
than Members' current spending.
On top of this general reduction, the COMCAR fleet
will be reduced and the use of VIP aircraft will be
initially restricted and ultimately its size will be
reduced significantly.
Political grants to trade unions and lobby groups
will be abolished.
Industries will experience reductions in Budgetary
assistance, as well as the accelerated reductions in
tariff protection.
Jobs in the public service will be reduced in line
with reductions in overmanning and improvements
in efficiency.
Social security is the largest single item of
Commonwealth Budget outlays with spending of
about $26 billion in 1991-92. The Coalition has
sought savings which will encourage greater selfreliance. At the same time, we have ensured that noone is left without a safety net.
While there are significant cuts to some social
security outlays, the Coalition has sought to target
assistance to the genuinely needy. The best example
of this is that we have deliberately and significantly
over compensated the age, invalid, wives', widows,
war widows, sole parent's, service, disability and
carer's pensions.
In all areas of income support and family assistance
there will be a uniform and realistic assets test. In
times of individual extreme economic circumstances, the income test only will apply.
Across the range of portfolios, the Liberal and
National Parties will make substantial savings as
shown in Table 6.6 on the following page.
Savings will be achieved by:
better targeting of programs to those who
need them;
greater efficiency in the way programs are
managed and in the way services, benefits
and assistance are delivered;
reducing or eliminating programs where
there is duplication
of other services or where
p
provision of benefits or services by
government is no longer appropriate; and
53

TABLE 6.5
FAMILY ALLOWANCE RATES

(A) Up to $30,000, Family Allowance rates will be:

No of Children

New Rate Per Fortnight

Old Rate

$ 40.00

$ 20.00

$ 80.00

$ 40.00

$120.00

$ 60.00

$173.40

$ 86.70

$226.80

$113.40

extra child

$ 53.40

$ 26.70

(B) Between $30,000 - $40,000, Family Allowance rates will be:

No of Children

New Rate Per Fortnight

Old Rate

$ 30.00

$ 20.00

$ 60.00

$ 40.00

$ 90.00

$ 60.00

$130.05

$ 86.70

$170.10

$112.40

extra child

$ 40.05

$ 20.25

(C) For Families with combined income in excess of $40,000, the rates of Family
Allowance will be increased with reduced cut off levels:
No of Children

54

Rate per Fortnight

FA not paid if
income exceeds

$ 21.20

$55,000

$ 42.20

$58,000

$ 63.60

$61,000

$ 91.90

$64,000

$120.20

$67,000

extra child

$ 28.30

Fightback! - It`s your Australia

 greater cost recovery by charging for

commercial services and encouraging private
sector funding of some programs.

activity by activity, with an important

educational role to emphasise the need for us to
match international best practice, in everything
we do;

Keeping Government In Touch

Perhaps the most accurate electoral perception of
Canberra bureaucracy and government is that they
have become increasingly out of touch in recent
years. This is no better evidenced than by the
appallingly inaccurate forecasts and assessments of
the current recession by both Government
departments and advisers.
There is also a mounting body of opinion that
believes that existing government structures
mitigate against significant and dramatic change and
policy development to that end. This view tends to
argue that it will become increasingly important to
inject experienced and talented outsiders with first
hand experience of the reform tasks in particular
areas. To that end, we will review existing staff
recruitment, transfer and promotion policies and
contracting arrangements to permit new talent to be
injected to all levels of the Public Service. That will
include making a number of key, senior
appointments from outside - from Departmental
head level down - for specific time periods to do
specific jobs.
The Coalition also accepts the ongoing need to bring
the government processes closer to the people and
their problems and is therefore committed to:
moving the relevant divisions of the main
economic advisory departments to other parts
of Australia where they will be directly
exposed to our economic and industrial
problems. Specific examples of beneficial
moves include:
the economic conditions section of Treasury
to be based in Sydney or Melbourne where
the main financial and business operations
are headquartered;
the foreign investment division of Treasury
moved to Melbourne;
the financial institutions division of
Treasury to be moved to Sydney;
specialist divisions of Industry and
Commerce will be moved to Sydney or
Melbourne; and
elements of the Department of Primary
Industry and Energy will be moved to a
regional centre;
completely revamping of the role of the
Industry Commission to upgrade its role in
monitoring the progress of micro-economic
reform and a stronger focus on
"benchmarking". The Industry Commission
would have the specific task of identifying best
international practice, industry by industry,
Fightback! - It's your Australia

extending the regionalisation of key social and

tax collecting department to both regional
centres and suburban areas of major centres.
Making Use Of Private Sector Expertise
As well we will take advantage of the best private
sector practice in the provision . of services currently
provided by the Government.
Many of these services can be corporatised,
privatised or contracted out with significant savings
to the taxpayer.
Over many years, governments have increasingly
and inappropriately involved themselves in the
provision of goods and services that are more
efficiently provided by the private sector. Public
sector activities are often shielded from competition.
Individual firms in a competitive private sector have
no option but to minimise ,their costs and maximise
efficiency if they are to prosper. This . means they
must be innovative and responsive to changing
demands.
The users of many services currently supplied by
government would benefit considerably if these
services were delivered by the private sector. The
contracting out of such services will provide a better
definition, and will enable more direct targeting, of
the service provided. It will also enable the level of,
and need for, community service obligations to be
accurately assessed and be more cost efficient.
For example, research indicates that at least 20 per
cent can be saved in the cost of delivering a service
if it is contracted out. The Industry Commission has
estimated that contracting out a range of services
currently provided "in-house" by all levels of
government would generate savings of $3.4 billion a
year, Australia-wide.
Services that can be contracted out include:
office cleaning and waste collection;
security and fire protection;
computer services;
transport and storage management;
catering and laundry;
property management, construction and
maintenance;
training;
laboratory analysis.
Implementing this extensive program of contracting
out will free resources tied up in the public sector
and reduce public spending while providing better
services.

55

TABLE 6.6
THE COALITION'S THREE YEAR EXPENDITURE PROGRAM
(1991/92 DOLLARS)
Increases
in Outlays

Decreases
in Outlays

General Savings (Political)

Departmental Efficiency Saving
Aboriginal Affairs
Administrative Services
Arts, Heritage and Sport
Attorney-General and Justice
Communications
Community Services and Aged Care
Corporate Law and Consumer Affairs
Defence
Education
Employment and Training
Energy and Resources
Environment
Family Assistance
Finance
Foreign Affairs
Health
Housing
Immigration and Ethnic Affairs
Industrial Relations
Industry and Commerce
Land Transport
Primary Industry
Prime Minister and Cabinet
Privatisation (Public Debt Interest)
Science and Technology
Social Security
Tourism and Aviation
Trade
Treasury
Veterans' Affairs

0
0
0
0
0
0
2
0
3
300
403
35
0
0
1060
0
0
698
180
0
0
0
0
0
0
0
0
2643
0
0
475
0

47
249
90
220
60
52
76
0
13
500
173
300
440
10
0
6
209
1509
400
21
79
53
87
497
34
1328
20
2415
23
70
787
8

47
249
90
220
60
52
74
0
10
200
-230
265
440
10
-1060
6
209
811
220
21
79
53
87
497
34
1328
20
-228
23
70
312
8

SUB TOTAL

5799

9776

3977

Redundancy Allowance
Telecom Debt Repayment

200
0

0
275

- 200
275

NET TOTAL

5999

10051

4052

Net Savings

PORTFOLIO

56

Fightback! - Its your Australia

9. PRIVATISATION
In addition to cutting Government waste, the
Coalition is committed to a major privatisation
program of Commonwealth authorities which
undertake essentially business functions.
The Commonwealth currently owns and operates
over six hundred trading organisations, statutory
authorities and business enterprises many of which
clearly could, and should, be owned by their
employees and private sector investors.
Privatisation, accompanied by increased
competition, will generate greater efficiency, higher
productivity, lower prices and better services and is
essential to deregulating key sectors of the economy
such as transport and communications. Privatisation
will help to maximise the gains from increased
competition, enable a more appropriate role for
government, reduce public sector debt, widen
community share ownership and facilitate enterprise
bargaining.
The Coalition will undertake a significant program
of privatisation including:
Qantas
Commonwealth Bank (remaining shares)
Australian Industry Development Corporation
(remaining shares)
Snowy Mountains Engineering Corporation
Australian National Line (remaining shares)
The Pipeline Authority
Commonwealth Serum Laboratories
Australian and Overseas Telecommunications
Corporation (formerly Telecom and OTC)

Federal Airports Corporation

Medibank Private.
The Coalition's program of privatisation will
encourage all Australians to become shareholders
and will also ensure that employees become
participants in ownership and profit sharing.

10. TARIFF REFORM AND ANTIDUMPING MEASURES

Traditionally, Australian policy makers believed
that a small domestic market (with small production
runs and higher capital costs per unit of production)
meant that our manufacturing industries needed
protection to survive.
The resulting higher prices were sometimes justified
as the cost of maintaining "strategic" industries or
protecting employment. At other times, policy
makers justified protection as necessary for "infant
industries" to survive to maturity when they would
no longer need help.
But more than 40 years after the first "all-Australian
car", tariffs still add about $4000 to the cost of the
Fightbackl - It's your Australia

average vehicle sold in Australia. This is the tariff

required to make local cars competitive with
imports. Yet the motor industry has been in decline
for more than a decade, shedding more than 20,000
jobs and steadily losing market share. Our most
protected industry, textiles, clothing and footwear,
shed 17,000 jobs in 1990, the year when protection
reached an all-time high.
The clear lesson is that, under our existing
commercial culture, protection has neither created
viable export industries nor protected local jobs.
On the other hand, over a decade which has seen
significant tariff cuts, manufacturing exports have
increased from 9.1 to 14.7 per cent of total exports.
Cutting tariffs, far from heralding the demise of
manufacturing industry, has actually helped our
manufacturers to lift their game. Adding genuine
microeconomic reform to the policy mix will lead to
a further major expansion of manufactured exports.
However it is important to recognise that tariff
reduction should proceed in tandem with genuine
micro-reform which is designed to reduce or
eliminate the major cost disadvantages which
bedevil our industries. The Hawke Government has
failed to deliver the necessary reform and more
recently has compounded this failing by its interest
rate and exchange rate policies.
The Liberal and National Parties will cut tariffs to
negligible levels by the Year 2000 as part of a
reform agenda which allows our firms to take on , the
best in the world and win. In this respect, tariff cuts
are not an attempt to create a "level playing field" in
international trade. We are not trying to achieve a
textbook economic orthodoxy derided by our
competitors. Rather, we are putting our own
domestic house in order. We are eliminating
unnecessary domestic costs so that our export
industries can become leaner and more competitive.
Eliminating motor vehicle tariffs is not a favour to
foreign car companies -it saves Australian
consumers an unnecessary tax, frees their money for
other purposes, and forces local car companies to
match best international practice. It actually means
more jobs in the future.
There are two other important dimensions to our
tariff policy. One is a significantly improved set of
anti-dumping procedures. The other is a major
international push: bi-lateral (for example CER),
regional (for example APEC), and multi-lateral (for
example GATT) to improve access to international
markets and break down corrupt international
trading practices.
Unfair trading practices by locally based companies
are not tolerated within Australia. The Liberal and
National Parties consider that unfair trading
practices by overseas producers should not be
tolerated in Australia either.
57

A Hewson Government will ensure a fairer trading

environment by introducing effective anti-dumping
and countervailing procedures. In particular, we
will significantly reduce the inquiry period for antidumping and countervailing cases.
The changes proposed will not allow anti-dumping
and countervailing procedures to be used as an
alternate aveneue for unlimited assistance. This
would patently work against our objective of
negligible protection, at most, for all Australian
industries by the Year 2000. They will, however,
ensure that unfair trade practices and claims of such
practices, are dealt with quickly and effectively, thus
giving greater certainty to both domestic and foreign
producers.
In respect of anti-dumping procedures, domestic
producers must currently wait 255 days to conclude
an anti-dumping action and anti-subsidy restrictions
are not getting the priority they deserve. A Hewson
Government will put arrangements in place so that
preliminary findings can be in place in 65 days, and
final hearings concluded in a maximum of 155 days.
We will also extend the sunset provisions for duties
from three to five years.
A Hewson Government will seek to eliminate the
major disparities in health, quarantine and other
restrictions and standards that exist between our
exports and imports.
A Hewson Government will also review developing
country preferences where those countries have
developed to the point where they no longer need
preferences.

11. INFRASTRUCTURE REFORM

Australian industry struggles with an infrastructure
that falls significantly short of best international
practice and which imposes cost disadvantages of
forty to fifty per cent.
(a) Land Transport
A Hewson Government will abolish petroleum
excise and slash transport costs.
The Commonwealth will retain responsibility for
national highways which will be funded from
general revenue. Over the longer term,
responsibility for road funding will be transferred to
the National Road Transport Commission and roads
will be funded through user charges as proposed in
the current negotiations being undertaken in the
context of the Special Premiers' Conference.
An efficient national railway is essential to the
revitalisation of Australia's land transport. A
Hewson Government will reorganise Australian
National Railways on a strictly commercial basis
and ensure that the National Rail Freight Initiative
does have some substance and facilitates an attack
on basic problems such as over manning.
58

(b)

The Waterfront and Shipping

Australia's waterfront is marked by excessive

government involvement, a lack of competition,
chronic overmanning and restrictive work and
management practices. For years, the prevailing
work culture meant that two wharfies were "needed"
to drive a crane with one set of controls; that two
wharfies were required to be on board ship during
unloading whether required or not; and that casual
staff could not be hired during busy periods
necessitating flying in extra wharfies from other
ports.
A Hewson Government will end wharf workers'
"jobs for life" scheme, implement voluntary
unionism and break the Waterside Workers'
Federation monopoly on the waterfront. The move
to enterprise agreements will give stevedoring
companies the right to recruit and manage their own
workforces. We will privatise port authorities and
promote competition within, as well as between,
ports.
Coastal shipping, and Trans-Tasman shipping in
particular, is in a scandalous state, which is why
some companies send cars to New Zealand by air
rather than risk the costs, delays and damage of sea
transport.
We will remove the requirement that coastal
shipping remain an Australian monopoly, end the
union-to-union Shipping Agreement which keeps
foreign ships out of the Trans-Tasman trade, and
fully privatise the Australian National Line (ANL).
(c) Telecommunications
More than a year after the Labor Party Conference
permitted the Government to license a Telecom
competitor, the only real change is that an efficient
OTC has been merged into an inefficient Telecom.
A Hewson Government will fully privatise Telecom
and open our telecommunications market to full
competition. Austel will be retained and given more
teeth and more resources, not in order to impose
unnecessary "standards" but to ensure the fullblooded competition which will give consumers
lower prices and better services.
(d) Aviation
The Government has replaced the two airline policy
with a three airline policy. The resulting price
reductions are but a forerunner of the potential
benefits from full deregulation.
We will allow Qantas and Air New Zealand to
compete on domestic routes and deregulate
Australian airports so that they operate on a more
commercial basis and offer more effective access to
new competitors. We will totally privatise Qantas
and Australian Airlines as a . matter of top priority.
We will accelerate the construction of the third
runway at Sydney Airport and proceed with the
construction of a third airport.
Fightbackl - It's your Australia

We will pursue an "open skies" policy which will

involve the renegotiation of air service agreements
and the further encouragement of international
charters to operate to and from Australia.
(e)

Utilities

Microeconomic reform in the area of utilities is

principally a State responsibility. Nevertheless, the
duplication evident in current plans to build a hydroelectric dam on Queensland's Tully Mill Stream
while a state-of-the-art power station stands underutilised across the border in NSW, points to the need
for a national perspective.
A Hewson Government will negotiate with the
States to establish free inter-State trade in electricity
through the establishment of a national power grid
(AUSELGRID). This will improve efficiency and
lower costs to consumers through increased
competition and a more productive use of resources.

12. COMPETITION POLICY

Our policies to free the labour market, accelerate
microeconomic reform and cut business .costs will
stimulate greater competition. Many of the markets
which are now rigged, such as labour, trans-Tasman
shipping and aviation, will experience full
competition for the first time. In addition, in cooperation with the States, we will extend the
operation of the Trade Practices Act to Government
instrumentalities which can abuse market power just
as much as private business.. The Trade Practices
Commission will be given additional resources.

13. WORLD CLASS SCHOOLS,

UNIVERSITIES & TRAINING
Australian schools, universities and training
institutions need to aim at, and achieve,performance
at international levels.
It is not enough just to maintain standards relative to
our own past performance, when Australian students
are falling behind those of other countries.
Education and training of international standard are
central to our determination to ensure real job
opportunities and the opportunity for satisfying lives
for all Australians.
In its broadest conception, education is the gift of
present to future generations. The care we put into
education is a measure of our consideration for our
children and our hope for the future.
The deepest problem in Australia's schools and
universities is not lack of learning, but lack of spirit.
Too many of our educators have lost their zest to
teach under a mountain of paperwork and the weight
of union-enforced mediocrity.

Fightback! - It's your Australia

Strategy for Excellence

Our strategy to lift the standards of Australian
education and training centres on the creation of
flexible, financially autonomous, and locally
managed institutions accountable to informed parent
and student markets and on moving away from
centralised, confrontational industrial relations.
We will increasingly move towards funding students
rather than institutions and rewarding strengths and
excellence rather than non-performing providers.
Only such a strategy will ensure that the
fundamental conditions for outstanding educational
institutions will be achieved. These are effective
institutional leadership, clear educational goals
emphasising achievement, diversity of institutions
to meet the diversity of student needs,
responsiveness to the needs of students, parents, the
community and industry, improved status and
conditions for teaching and academic staff, and
accountability to the community.
Our strategy is based on our commitments to:
regard education and training as among
Australia's most vital investments. Over the
rest of this decade, we will commit to
education and training new spending of over $3
billion. The program for the first term of
Government is detailed in this package as is its
funding.
improve information about standards actually
being reached so that deficiencies can be
identified and students properly helped; so that
resources can be better targeted; and so
progress towards international standards can be
monitored. We firmly believe that such a
program will help to restore community
confidence in our schools and training
institutions.
World Class Schools
The key to the establishment of world class schools
is a much greater willingness to invest in teachers, to
strengthen parental choice of schools and local
initiative, and to provide better information about
the success of programs and the quality of learning.
In particular we will:
free all educational services from the impact of
the Goods and Services tax (i.e. we will zerorate education and training);
establish programs creating additional
professional development opportunities for
teachers in key areas of literacy and numeracy,
language, science and technology, worth $20
million a year. These will include a $10 million
Quality of Teaching program to support `best
practice' initiatives in professional development, and tertiary professional development
59

units especially in science, mathematics and

technology.
establish national Australian Teaching
Excellence -Awards to acknowledge
outstanding achievements in teaching on the
nomination of schools and parents. We see
raising the status of teaching in the community
as a key objective in lifting the quality of
schooling.

recognise that gifted children are today a

disadvantaged group, and that such children
not only have an entitlement to full educational
opportunity to develop their talents, but that it
is very much in the interest of the community
as a whole to ensure that this occurs. A $2
million program to provide professional
development, research and "best practice"
support will be established to help gifted
children;

work through the Australian Education Council

and other forums to correct the structural
problems of the teaching profession, such as
restrictive awards and regulations preventing
freedom of movement between sectors and
dependence on centralised employment
practices.

improve educational assistance for rural and

isolated children by abolishing the asset test on
the Assistance for Isolated Children's scheme,
and setting aside the AUSTUDY asset test in
cases of extreme economic hardship as are
affecting many rural families at present;

structure programs to enhance initiative at the

school level and strengthen parent choice
within the government school sector;

increase the value of benefits under

AUSTUDY to fully compensate for the effects
of the Goods and Services Tax.

a "Literacy Start" program of $5 million

per annum will provide a much more
effective way of supporting early
intervention to improve literacy skills
during the vital early years, based on
funding `best practice' initiatives;

Training of International Standard

a school level excellence program in

languages other than English of $5 million
per annum will be funded on the basis of
school-level initiatives and competitive
tender;
a "Schools of Choice" program for
government schools of $10 million per year
will support the development of specialised
programs in science, mathematics,
technology, English and other languages,
with parental freedom to apply for
admission to such programs for their
children;
establish with the States and nongovernment school systems national
monitoring of standards in literacy,
numeracy and other core skills which are
required for successful workforce and
social participation;
strengthen the right of low and middle income
families to choose a school which reflects their
particular values by significantly increasing per
capita grants to non-government school pupils,
and by abolishing the highly restrictive socalled "new schools policy" which has
prevented many thousands of parents from
setting up or extending their school of choice;
recognise a serious deterioration in the quality
of infrastructure in the non-government school
sector, and the importance for equal
educational opportunity of not letting this
sector fall behind. Accordingly we will double
capital grants to the non-government schools to
$162 million per annum (in 1990/91 dollars);
60

Knowledge and skills of world class standard have

underpinned the economic success of nations such
as Germany and Japan. Lifting the standards of
Australian training to international levels requires
the development of an open and competitive training
market, the structural reform of the TAPE systems
to ensure more flexible institutions and decentralised
leadership and industrial relations, and a clear policy
of support for training excellence.
The Liberal and National Parties will:
respond to the sentiment of the Deveson and
Finn reports and provide an additional $520
million for TAPE over the rest of this decade to
fund growth, opportunity and world class
skills;
provide for effective monitoring of the key
competencies required for success in the
workplace;

abolish the compulsory training levy;

support a national co-operative effort to raise
the profile of career education and develop
strategies to facilitate the involvement of

business in career education in schools;

support improved credit transfer arrangements
between schools and training institutions, and
training and universities;
establish a new program to be known as
AUSTRAIN which will allow people presently
unemployed to be hired at training wages
which reflect the duration of their
unemployment, so that they have the
opportunity to gain sound workplace
experience;

review AUSTUDY benefits to ensure that they

are appropriate to the training sector;
Fightback! - It's your Australia

work with the States to ensure that "at risk"

young people have available appropriate
assistance to help them make the transition
from school to further training and . into
employment;
support national competency based training
and a national system of certification for skills;
end intrusive Commonwealth accountability
requirements for TAFE and support
development of locally managed and
responsive TAFE colleges.
World Class Universities
The Liberal and National Parties will restore
independence to universities and increase support
for the basic research effort. Links with industry
should be encouraged, but in ways which will
enhance research opportunities rather than through
the disruptive ad hoc policies pursued by Labor.
The Liberal and National Parties will:
terminate the policy of forced amalgamations
and permit institutions which wish to disamalgamate on educational or efficiency
grounds to do so;
establish an effective student market for higher
education by basing the recurrent funding of
universities on a system of national education
awards given to students on the basis of merit
and scholarships;
restore universities' essential freedom to set
their own courses and end the process of
bureaucratically approved profiles;
free the academic labour market from the
centralised industrial relations system to
achieve better conditions for academic staff;
give universities the freedom to offer additional
places to Australian undergraduates - beyond
the government funded places - on their own
terms;
maintain and extend the Higher Education
Contribution Scheme to ensure that equitable
deferral arrangements for all students are
available;
establish an independent Higher Education
Commission to advise the Government on
university accreditation and funding;
provide an additional $245 million over the rest
of this decade for research to train outstanding
young graduates and to encourage clearer
research links with industry. Two hundred new
post-graduate research awards will be made
available, and the value of all awards will be
increased by $ 200 0. $25 million per year will
Fightback! - It's your Australia

go to a program to reward institutions, which

are successful in obtaining research contracts
from industry, with additional basic research
funds.

14. GENUINE ASSISTANCE FOR

THE UNEMPLOYED
There is something fundamentally wrong with the
existing system of income support which, in theory
at least, allows a person to leave school, go on the
dole and remain there until reaching pension age. By
contrast, the Liberal and National Parties believe
that only people who are serious about seeking work
have a right to a benefit. Because the best form of
welfare is work, our package is oriented towards
finding a job rather than simply providing a benefit.
Every unemployed person will enter an integrated
nine month program to return to work:
During the initial three months, people
receiving the Job Search Allowance must
provide the names of at least two prospective
employers approached in the previous two
weeks.
At three months, unemployed people will be
required to attend interviews, alerted to a range
of job training programs and be warned that the
Job Search Allowance terminates after nine
months. During the subsequent three months
random checks with named prospective
employers will ensure full compliance with the
work test.
After six months' on Job Search Allowance,
two prospective employers must certify in
writing every two weeks that beneficiaries have
approached them in person seeking work.
Unemployed people will at that time become
eligible to participate in AUSTRAIN.
Those who fail to satisfy the progressively
tighter work test or who refuse to participate in
the various training programs will no longer
eligible to receive income support.
AUSTRAIN is an innovative reform which allows
employers to recruit the jobless at a special training
wage set at 90 per cent of minimum wages for those
unemployed for more than six months. AUSTRAIN
provides those hitherto unemployed with the dignity
of performing valuable tasks plus the type of
training necessary for a full-scale return to work.
We will ensure that AUSTRAIN participants are
additional to firms' normal labour requirements and
do not fill existing jobs. We will establish Local
Employment Boards, comprising local business,
civic and Government representatives to supervise
AUSTRAIN contracts.

61

Someone without a job after nine months has three

options:
Subject to Local Employment Board approval,
the long-term unemployed may enter a workfor-benefit arrangement with a voluntary
organisation which provides relevant work
experience.
The long term unemployed may enter
Skillshare-style community-based training
programs administered by the Boards.
Finally, unemployed people who meet the
current liquid assets test, are unable to
participate in work-for-benefit or AUSTRAIN
and who continue to satisfy a rigorous work
test will qualify for Special Benefit.
None of our policy changes, however, will leave any
individual without access to taxpayer-funded
support where there is neither the capacity nor the
means for self-help.
A Hewson Government will give an extra $50
million to voluntary agencies, particularly those at
the "sharp end" of the fight against poverty. We will
invite the major private welfare agencies, such as the
Salvation Army, Smith Family, St Vincent De Paul,
Sydney City Mission and Brotherhood of St
Lawrence to submit spending proposals to qualify
for extra funds.
In addition, the welfare rules need to be applied so
that all equivalent categories of beneficiary are
treated equally.
We will lift the pension age for women towards that
applying to men. Pension ages were set when
average life expectancy was much lower and when
women were not expected to enter the paid
workforce. Maintaining a different pension age for
men and women is no longer compatible with the
general move to non-discriminatory arrangements.

15. A REALISTIC IMMIGRATION

PROGRAM
In the immediate post-war period, Australia
welcomed hundreds of thousands of refugees from
ravaged Europe. Since then, we have made a home
for the victims of war and oppression in many parts
of the world and welcomed millions of people who
have wanted to build a new life in a new land. The
Coalition Parties are proud of the contribution we
have made to that process over many decades and
we are determined to continue it.
A generous refugee and humanitarian component
aside, Australia's immigration intake must meet
Australian priorities. Australia has a duty to its
migrants - to ensure that they have access to full
participation in our national life. And our migrants
have a duty to their adopted country - to give an
overri ding and unifying commitment to it.
62

In the long term, we need to match our nation's

performance with its potential. To properly develop
our country and to do justice to its vast natural
resources, we need more people. Environmental
Iimitations do not prevent Australia from supporting
many millions more at a higher standard of living,
and with better environmental protection, than we
enjoy today. Existing concerns, however, over
continuing access to clean water and ensuring
sustainable land use warrant continuing study and
research.
In the short term, however, the number of new
migrants coming to Australia needs to take account
of existing economic conditions. In the midst of the
worst economic crisis since the Great Depression,
there are two constraints on our immigration intake.
Fewer well-qualified migrants want to come here in fact, over the past year, applications have fallen
by up to 20 per cent across all categories. And
Australia's capacity to accommodate a large migrant
intake is substantially reduced.
The Hawke Government's fundamental error has
been to set numerical targets and depress migrant
qualifications to meet them.
In the short term, a Hewson Government will
substantially reduce immigration to a level
significantly below the Government's current
projections.
In particular, the balance between family reunion
and skilled migrant categories should change to
favour skills - although compassionate migrant entry
under family reunion and humanitarian provisions
(particularly for refugees) will continue to be
accommodated responsibly.
Lower migrant intakes are not, in themselves, a
solution to Australia's economic difficulties which
will only be overcome by a sustained policy of
reform, as set out in this document. Such reform
will enhance Australia's prosperity and increase our
capacity to sustain a Iarge scale immigration
program.

16. STREAMLINING
DEVELOPMENT AND
PROTECTING THE
ENVIRONMENT
Economic growth and environmental protection can
be mutually supportive.
In Government we will implement a concerted
strategy to combat land degradation, to maximise
biological diversity, to achieve national minimum
standards of pollution control and improved air and
water quality, and to encourage energy conservation.
A Hewson Government will pursue a clear set of
environmental priorities. We will
Fightback! - Its your Australia

implement an integrated strategy to combat

land degradation and maximise biological
diversity. This will involve support of existing
programs as well as working with the States to
develop new approaches to:
re-vegetating over-cleared lands;
providing a policy framework which
encourages farmers to avoid overclearing;
providing appropriate tax arrangements
for those who, for conservation or
preservation reasons, incur expenditure on
the protection of native animals and
plants.
target critical areas within the national Land
Care program for special attention and reduce
the current 18 month period between lodging a
land care submission and receipt of
Government funding;
negotiate with the States to achieve national
minimum standards for pollution control and
improved air and water quality;
ensure that Federal Government agencies
maintain the best energy management practices
so that the Commonwealth plays a leadership
role and is able to urge the rest of the
community to do as we do (rather than do as we
say);

the Coronation Hill project in the Northern

Territory (which would generate four hundred
jobs during construction);
scrap Labor's Three Mines uranium policy and
permit the Northern Territory's Jabiluka and
Koongara uranium projects (which will
generate 1000 jobs during the construction
phase and 400 jobs during production) to
proceed at the developers' commercial
discretion, subject to the strict national and
international safeguards to ensure We and
peaceful use of the resource;
not hinder any pulp mill proposal which meets
the current pulp mill pollution guidelines and
which satisfies relevant heritage, social and
economic requirements;
give full faith and effect to State or regional
forest strategies which are drawn up and
implemented according to Commonwealth
approved procedures;
re-examine the tax rules applying to large,
long-term infrastructure projects such as the
Very Fast Train proposal;
establish a Prime Ministerial Working Group
on Sustainable Development to provide a onestop shop at Commonwealth level to assess
proposals according to pre-specified deadlines;

ensure that the Commonwealth itself meets

strict pollution standards and ends the farce of
demanding the world's highest standards but
not meeting those already in place.

review the tax system to ensure that

implementing best environmental practice is
not hindered by inflexible or outdated rules and
interpretations.

The Liberal and National Parties are committed to

sustainable development.

17. BUILDING A BETTER FEDERATION

The nations with the greatest environmental

problems are those with weak and struggling
economies.
A Hewson Government will promote sustainable
development by providing consistent development
guidelines which will promote both a growing
economy and effective environmental protection.
Even the ACTU estimates that nearly $7 billion in
job-creating investment is now held up by "green"
tape.
We will:
expedite construction of the third runway at

Sydney Airport;
put maximum pressure on the State
Government to facilitate the development of
the Marandoo iron ore project in Western
Australia (which will generate six hundred jobs
during the construction phase);
get out of the way so that the Jawoyn people
are free to negotiate with the joint venturers of
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The Liberal and National Parties are totally

committed to the Federal Constitution, the
cornerstone of our Federation.
We support the Federal system which distributes
powers in a way which encourages participation and
acts as a barrier against centralist, remote and
authoritarian control.
However, there is now broad agreement that
Commonwealth-State relations are in urgent need of
reform. There is also widespread agreement about
the problems which need to be resolved duplication, lack of responsibility and apparent lack
of co-ordination between different levels of
government.
In 1991, the States derived more than 50 per cent of
their total revenue in the form of payments from the
Commonwealth. In addition, nearly 50 per cent of
those Commonwealth payments were in the form of
conditional (or "tied") grants. By contrast the
Commonwealth raised about 80 per cent of general
government revenue but was only responsible for 54
per cent of Commonwealth and State own purpose
outlays.
63

The separation of revenue raising responsibilities

and spending decisions blurs and thereby diminishes
accountability. It also leads to less responsive, less
creative and less efficient governments.
In order to maximise competitive pressure, each
government has to be, as nearly as possible,
responsible for its own revenue raising and
expenditure decisions. This allows each State to
provide a "tax/service bundle" which has to compete
with bundles from other States. This allows greater
choice and a more efficient public sector.

income tax paid by individuals (ie no double

taxation).
Reform of Commonwealth-State relations - in
particular, allowing the States to make more of their
own decisions on taxing and spending, and to be
responsible for the consequences of those decisions will be one of the more effective and lasting ways of
boosting Australia's economic performance. As a
result, we all have the opportunity to be better off. It
would represent, arguably, the most significant
single reform of the 1990s.

In a nutshell, there is much to be said for

"Competitive Federalism" - for competition in
policy and in service delivery between the States.

18. A NEW FOCUS FOR TRADE

POLICY

States taxes are a significant source of inefficiency

and inequity. In particular, State taxes such as
payroll taxes impose a heavy cost on business and
investment and, therefore, jobs.

Within a framework of free trade, a Hews on

Government will give priority to enhancing our
economic interaction with the Asia-Pacific region
where, to date, we have barely scratched the surface
of the economic possibilities and have actually lost
market share in important regional countries.

The abolition of payroll tax will be accompanied by

payroll tax abolition grants to refund the revenue
foregone by the States. The payroll tax refund will
be sourced from GST revenue, thereby providing the
States with a more stable revenue base.
The Coalition is favourably disposed to the option of
providing the States with a permanent share of
income tax. The Coalition would be prepared to
"make room" for the States to share directly in
income tax revenue. In so doing, the existing rights
of the less prosperous States would be fully
protected. No State would be disadvantaged and the
relative positions of the States would be preserved.
There would be no separate state income tax.
The Commonwealth would be the sole collecting
agency. There would be a standard tax form.
Commonwealth and State taxes would be separately
identified on one assessment so that the taxpayer can
see the amount being levied by each form of
government.
The Coalition is therefore in broad agreement with
the proposals recently proposed to the Prime
Minister by the Premiers and Chief Ministers (in
November 1991). In Government the Coalition
would use the proposals as a basis for negotiation.
In particular, the key features would be:
the States would be accountable for an
identifiable component of national personal
income tax;
any proposed changes to these arrangements
would require the consent of the
Commonwealth so as to ensure the
effectiveness of the Commonwealth's overall
responsibilities for macro-economic policy;
the proposed arrangements would be revenue
neutral with no effect on the rate of personal
64

In particular, we will work to establish a GATTconsistent Free Trade Area in the Asia-Pacific
region. An exclusive, discriminatory trading bloc in
our region is not in the interests of Australia, the
region or the world. But a regional free trade area
aimed at reducing, and eventually eliminating, trade
barriers on a non-discriminatory basis would be an
important step in the right direction and we will
work through the Asia-Pacific Economic Cooperation (APEC) forum to achieve this objective.
In addition, we are committed to completing the
Closer Economic Relations (CER) process by the
end of our first year in government. Our aim is a
single internal market comprising Australia and
New Zealand, although we believe that a common
tariff or a single currency are inappropriate.
In our first year in government we will, among other
things, establish a single trans-Tasman aviation
market, abolish the Trans-Tasman Shipping
Agreement, provide New Zealand firms with
domestic status for investment in Australia, and
harmonise competition laws, professional and
product standards.

19. FOREIGN POLICY

Australia's recent foreign policy has been driven by
grandstanding and emotion rather than any clear
concept of our real international priorities. We have
been too ready to claim credit for positive
international developments and we have become
blinded by delusions about our real capacities.
Australia's self-inflicted economic crisis has
reduced our capacity for constructive influence in
the region and beyond. Important trading
opportunities have been squandered while our
general international standing has declined,
particularly in our own region where economic
performance has far surpassed our own.
Figbtback! - It's your Australia

Our international interests will be best served at the

present time by putting our own economic house in
order and interacting more effectively with the
countries of our region. To achieve this objective
we need to reduce our record foreign debt, maximise
our export potential and achieve real reforms in our
economic infrastructure.
Australia should be a major economic and political
player in the Asia-Pacific region by the Year 2000 this is our strategic goal. The Asia-Pacific region
will offer the greatest growth prospects in the world
for the next four to five decades at least and the
greatest opportunities for Australian exporters.
Australia need not, and should not, focus on Asia to
the exclusion of opportunities in Europe or the
Americas or elsewhere. But in terms of the size of
the market and its import needs, the Asia-Pacific
region offers Australia special opportunities.
The focus of our foreign policy, of course, extends
beyond economic issues to wider political, social
and other objectives. We will continue to pursue
those objectives on the basis of a clear view of
Australia's national interests.
We will promote democratic change and encourage
compliance with internationally recognised
standards of human rights in a way that is carefully
integrated with other concerns that . are central to

Fightback! - It's your Australia

Australia's international interests. Australia's

particular interest in promoting democracy and
human rights will be best served by promoting
dialogue for the development of support among all
communities in particular countries that are the
focus of our concern.

20. NATIONAL SECURITY

A Hewson Government will ensure our national
security through more effective regional diplomacy
by strengthening our alliance relationships
(particularly with the United States) and enhancing
the capabilities of our own Defence Force.
The Coalition is currently finalising a major review
of Defence policy. In terms of the reform package
outlined in this document, however, we aim to begin
the process of reforming and restructuring Defence
expenditure.
It is grossly inefficient, for example, that 24,000
Defence civilians administer 14,500 front line
combat personnel. We will ensure that our Defence
Force gets better value for the money it is allocated
through accelerated commercialisation of support
arrangements and through re-directing an additional
$300 million to combat areas of the Defence Force
(see Chapter 15 of the Tax and Expenditure
document).

65

7. CONCLUSION

The Liberal and National Parties are proud of this program and confident of its success. We
believe it will achieve the generational change of attitudes which will transform the prospects
of Australia over this decade.
This program crystallises the choice facing the Australian people. It is a choice between the
uncertainty produced by continuing national decline under current policies, on the one hand,
and the confidence in national recovery which a thoroughly planned program of reform alone
can offer.
In this paper, we believe we have produced a completely documented case for the necessity of
the program we are proposing. It is, we believe, irrefutable.
There is really only one question which Australians should ask: are you less prosperous and
less optimistic now than when the Hawke Government came to power?
We are confident that the vast majority of Australians will be better off under our proposals.
More than that however, our program opens the way once again to rebuilding the foundations
of Australian life, and restoring vitality to the Australian spirit.
Australia, it's now in your hands.

Fightback! - It's Your Australia

66

References Used in this Document

OECD, Economic Outlook Database, No 49, July 1991 (as compiled by the Statistics Group of the
Parliamentary Research Service) (p 7).
Reserve Bank of Australia Annual Report 1990/91, August 1991 (p 9).
Australian Manufacturing Council Reference (p 12).
Metal Trades Industry Association Reference (p 12).
Michael E Porter, "The Competitive Advantage of Nations", Free Press, May 1990 (p 3).
Office of Economic Planning Advisory Council (1988), "Raw Materials Processing: Its Contribution
to Structural Adjustment", Council Paper No 31 (p 4).
Pappas Carter Evans & Koop/I'elesis, "The Global Challenge - Australian Manufacturing in the
1990's", July 1990 (p 4).
Industry Commission Annual Report 1989/90, AGPS, Canberra 1990 (p 4).
Business Council of Australia Report, "Developing Australia's National Competitiveness",
1991 (p 4).
R Chapman and D Vincent, "Payroll Taxes: An Investigation of the Macroeconomic and IndustryLevel Effects of Their Removal", August 1985.
Reform of the Australian Tax System, Draft White Paper, June 1985 (p 17).

Fightback! - It's Your Australia

67

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