The 1984 Federal Budget was Treasurer Paul Keating’s second. It was the first to be televised.
The Budget Speech was delivered in the House of Representatives at 8pm on Tuesday, August 24, 1984.
Earlier in the day, the House paid tribute to Sir Phillip Lynch, the former Liberal Treasurer (1975-77), who died on June 19.
- Listen to Keating (27m)
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Hansard transcript of Treasurer Paul Keating’s 1984 Budget Speech.
Mr KEATING (Treasurer)(8.00) —I move:
That the Bill be now read a second time.
In doing so, I present the Budget for 1984-85.
It is just 18 months since the Australian people elected a Labor Government-at a time of severe economic crisis.
Australia was in the grip of the most savage economic recession in fifty years; the economy was in severe decline; unemployment had grown by 270,000 in the previous twelve months and inflation was rising at 11.5 per cent.
A remarkable transformation has taken place in the Australian economy since I presented the Labor Government’s first Budget 12 months ago.
Tonight, I am proud to be able to tell the Australian people that we now have strong economic growth, many more jobs, a substantial fall in inflation and declining interest rates.
The Government’s policies are on track; they are producing the results we sought-results that our opponents and many commentators said were not achievable in such a short time.
We have shown the Australia people that their trust in us was well founded.
This Budget consolidates and builds upon those successes.
But it aims to do much, much more.
Australia now has before it an historic opportunity to embark upon a new growth path.
That is, the achievement of non-inflationary growth-sustainable economic growth -that will provide the lasting jobs so desperately needed by the unemployed- growth that will provide real benefits to other needy groups in our society.
We can take this path, or we could opt for a return to the sickness of the 1970s-with high inflation, low growth and declining job opportunities.
There can only be one path to take. There is no real choice. This Budget is directed at ensuring that the opportunity does not pass us by.
RECENT ECONOMIC PERFORMANCE
Mr Speaker, at the time of the last Budget, there was much debate about the economic strategy this Government adopted to tackle Australia’s worst recession since the 1930s.
Some thought we were expanding Commonwealth spending too much; others believed we were being too timid.
Whatever views were held then, I believe that by any measure the achievements of the past 12 months have far exceeded expectations.
No one could seriously argue that we could have done better. In the past year- and-a-half of the Labor Government, Australia has undergone a transformation.
In the year between the June quarters of 1983 and 1984, economic growth was over 10 per cent, the best performance in the 25 years for which quarterly national accounts have been compiled.
This means Australia was the fastest growing economy in the Western World.
In the same year, 230 000 Australians found jobs, compared with the 240 000 who lost them the year earlier.
Inflation fell to 6 1/2 per cent; and declined over the course of the year, so that during the last six months it was running at an annual rate of about 5 per cent.
That means our inflation rate is finally falling to about the same level as our major trading partners.
Profits recovered, interest rates fell and business investment began to pick up .
Central to that success was the Accord on prices and incomes between the Government and the Australian trade union movement.
The Accord has been a remarkable success-and the contribution of the ACTU to that outcome has been vital.
Where the last Government was unable to stimulate the economy because of fears of wages and prices breaking out-thus causing inflation to accelerate-this Government has been able to restore a strong rate of growth, but in the company of falling inflation.
This has only been possible because the Accord has given the Government an agreed basis of wage and price restraint.
That restraint, that moderation, has restored health to business, producing profits that can now be ploughed back into expansion and jobs.
On the basis of the Accord, the Government was able to employ the traditional arms of policy to set the economy on the path to recovery.
Budget policy was structured to employ a deficit of sufficient power to re- start the economy, and an effective monetary policy was applied to finance it, without adding to inflationary pressures.
The policy of fighting inflation and unemployment simultaneously, championed by the Labor Party during the last election campaign and now employed as the policy of the Government, has borne fruit quickly.
At long last, an Australian Government has provided a comprehensive and coherent economic policy within which all sections of the community can work together.
THE 1984-85 BUDGET
Our strategy this financial year will be to continue with the co-operative approach pioneered last year and to consolidate and build upon these achievements.
The strategy will seek to ensure that economic recovery continues, that inflationary pressures are further reduced and that job prospects are further improved.
We have the policies to overturn the history of more than a decade, a history of economic stops and starts, of recoveries that were frittered away in one senseless, destructive price and wage round after another.
This time, with the co-operation of all Australians and the Australian trade union movement, the story will be different.
Australian workers can continue moderation in their pay claims in the clear knowledge that the nation will be the better for it and that their own position will be more secure.
In recognition of the restraint practised to this time and on the basis of its continuation, the Government will provide in this Budget a significant cut in personal income tax, particularly for those on low and middle incomes.
At a cost of $1300 million in 1984-85, and over $2100 million in a full year, all taxpayers are to receive a reduction in tax, with the biggest percentage reductions going to lower income earners.
We will introduce a new five step tax scale, replacing the old three step scale , in order to make the tax system more progressive and fair.
At the lower end of this scale, the tax rate on income between the threshold and $12,500 a year is to be reduced from 30 cents in the dollar to 25 cents.
This will mean that taxpayers earning less than $240 a week will enjoy a tax reduction of almost 17 per cent.
All taxpayers earning between $240 a week and $538 a week will have a tax cut of $7.60 a week. The majority of Australian employees earn between these amounts and most taxpayers will receive the $7.60 tax cut.
This will assist in the quest for continuing income restraint and to that extent will underpin the Prices and Incomes Accord, and should command the full support of the trade union movement.
It will also boost family incomes, and hence will stimulate consumer spending as the year progresses.
People with incomes above $28,000 a year will also receive a tax cut, but its size will gradually diminish as income exceeds $538 a week.
These tax changes will take effect from 1 November.
As well as tax cuts for those in employment, the Government regards it as imperative that social welfare recipients and beneficiaries, particularly those in greatest need, receive support in this Budget.
To this end the Budget provides a social welfare package that will cost $430 million in 1984-85 and $683 million in a full year, over and above the normal indexation arrangements.
The Government has decided to raise indexed pensions and benefits, including the unemployment benefit, from the first payment in November 1984, by $2.50 per week for single people and by $4.20 per week for couples.
That increase will lift the single pension rate to $91.90 a week and the combined married rate to $153.30. It will more than compensate beneficiaries for the effect of the introduction of Medicare on the indexation adjustments to pensions.
Also, under the usual indexation arrangements those pensions and benefits will further increase in May 1985.
In addition to these increases in general pensions and benefits, the Government is providing special assistance targeted to those groups most in need.
From November 1984 we shall be giving substantial extra help to pensioners who rent and to those with children.
Supplementary rental assistance will increase by 50 per cent to $15 a week; additional pensions and benefits will increase by $2 to $14 a week per child, while the mother’s and guardian’s allowance will increase by $2 to $10 a week.
In all, since the Government took office, the pension income of a sole parent pensioner with two children in privately rented accommodation will have gone up by some $30 a week, an increase of over 25 per cent.
A further increase of $2 per week will be provided from May 1985 to single unemployment beneficiaries 18 years of age and over with no dependants.
These changes mean that the single adult unemployment benefit will have increased by over $20 a week, or by about 30 per cent, since this Government won office.
The Government is particularly concerned about the structure of the various forms of assistance to young people, and will undertake a fundamental review of present arrangements in time for the next Budget.
In the meantime, tertiary education allowances will be increased by 10 per cent ; allowances under the Secondary Allowances Scheme will be increased by 15 per cent; and the family income limits applying to both schemes will be extended by 10 per cent.
Also in advance of this review, the maximum rate of unemployment and sickness benefit for single people aged 16 and 17 years will be increased by a further $5 to $50 per week for those who have been in continuous receipt of benefit for six months or more.
The Government recognises that unemployment is a principal cause of poverty in Australia.
The unemployed have borne the brunt of the failure of previous economic policies for too many years.
That is why the Government in its first year of office and now in this Budget has substantially increased benefits to the unemployed and provided major job creation programs.
However, the fundamental task before us is to create permanent employment.
For this reason the overwhelming objective must be to maintain the momentum of economic recovery so as to maximise employment growth.
And to do that we need more investment.
That will happen this year; there will be more investment. But to encourage it further, the Budget incorporates a number of initiatives in the area of business taxation.
First, the rate of depreciation on new non-residential income-producing buildings will be increased from 2.5 per cent to 4 per cent.
That will provide a significant boost to the construction industry.
Secondly, the tax system is to be changed to allow companies to transfer losses between different members of their company groups where there is 100 per cent common ownership.
This should significantly improve the cash flow position of many companies undertaking new investments.
Thirdly, the Government has agreed to provide a concession long sought by the mineral exploration industry.
After tonight, money spent on general mining exploration will be deductible against income from any source, thereby providing considerable assistance to many members of the mining industry.
These three initiatives, combined with the very generous accelerated depreciation provisions legislated by this Government, provide a sound environment for business investment in coming years.
They will, at substantial cost to the Government, provide considerable financial support for business investment.
It must be recognised, though, that the cost to the Budget of these measures, particularly the accelerated depreciation provisions, will grow rapidly over the course of the decade.
Therefore, the Government has decided not to alter that aspect of the former Government’s legislation which sets 30 June 1985 as the date by which plant and equipment must be ordered to qualify for the investment allowance.
However, the Government will extend to 30 June 1987 the date by which plant must be in place to qualify for the allowance.
This will be of particular assistance for firms undertaking large projects with lengthy lead times.
Aside from those changes, a number of other adjustments are being made to the tax system.
Zone rebates for those living in remote areas are to be increased by 25 per cent, and de facto couples are to become eligible for the dependent spouse rebate. Also, new rebates are to be introduced to ensure that people whose sole income is derived from unemployment, sickness or special benefits do not have to pay tax.
The Government has decided to make few other changes to the tax system, the major exception being the tax treatment of beer and wine.
First, the tax arrangements for low alcohol beer are to be restructured. These are in two categories.
The first comprises very low alcohol beer which contains less than about one per cent alcohol. Until now this has been exempt from tax.
The second, much larger, category is that of light beer which typically contains about a half or two-thirds of the alcoholic strength of ordinary beer, which until now has been taxed at the same rate as full strength beer.
The Government believes that this tax structure should be changed in recognition of the lower alcohol content.
For this reason, the Government has decided to reduce the excise on ordinary light beer by 8 cents per litre, or about three cents a can.
The Government has also decided to remove an anomaly by imposing a sales tax on very low alcohol beer at the same rate which now applies to soft drinks-that is, 20 per cent.
The new sales tax will raise about $6 million a year.
However, lowering the excise on ordinary light beer will cost the Government about $12 million a year.
The Government is also concerned that the previous tax regime discriminated heavily against beer and spirit drinkers in favour of wine which has not been taxed at all.
Against that background, a sales tax of 10 per cent on wine and alcoholic cider is to be introduced from tonight. This is expected to increase revenue by $49 million in 1984-85 and $62 million in a full year.
To avoid any risk of double taxation, the excise collected last year on fortifying spirit will be refunded to producers.
BUDGET OVERVIEW
As I have stressed, this Budget is about economic growth, it is about embarking upon a new growth path.
One of the major contributions any Government can make towards encouraging that growth is to create the conditions which open the way for further falls in interest rates.
I say further falls, because in the last year we have seen very significant reductions.
Lower interest rates will greatly encourage business investment-and if this economy is to grow, we need investment.
For that reason the Government, in framing the Budget, has kept a careful eye on the overall impact on financial markets.
The end result is a Budget deficit for 1984-85 of $6745 million, a reduction of $1216 million on last year’s deficit.
This will be equal to 3.3 per cent of gross domestic product, a marked reduction from last year’s 4.3 per cent.
This will reduce the overall borrowings of the public sector, and help minimise pressure on interest rates-to the benefit of all Australians.
In sum, the Government has kept its three-fold commitment for the 1984-85 Budget.
We will substantially cut personal income tax.
We will increase social security spending, and in particular direct the extra assistance to those most in need.
And we will reduce the Budget deficit by over $1200 million.
Australia can be confident that this strategy will provide a basis for further strong economic growth in 1984-85.
We expect non-farm growth to average 5 per cent, a little larger than last year ‘s excellent figure.
But overall growth will not match non-farm growth because last year’s strong outcome for the rural sector will not be repeated.
For that reason, we believe gross domestic product-that is, for the total economy-this financial year will be about 4 per cent higher than in 1983-84.
Such growth will see a further large increase in jobs, and another fall in the unemployment rate.
By June next year, we expect that since coming to office over 400 000 new jobs will have been created in Australia.
That will place us well on the way to fulfilling our election-time promise to create 500 000 jobs in three years.
Underpinning those achievements, inflation will remain at its lowest level in more than a decade.
With continued wage moderation and a non-inflationary monetary policy, the rise in the consumer price index is expected to be a little over 5 per cent between the June quarters 1984 and 1985-a dramatic change from the 11 1/2 per cent inflation rate we inherited from our predecessors.
As I said at the outset of my speech, it is just 18 months since the Labor Government was elected in the midst of a grave economic crisis.
While it was clear before the election that the Australian economic situation was grim, it was not until after the election that the full truth was revealed to the Australian people.
It became apparent to all sections of the Australian community that the situation was drastic-that, unless this Government could lead the way out of recession, Australia would be condemned to another decade of economic stagnation and decline.
At the National Economic Summit a consensus emerged that the crisis would be overcome only by the application of the right policies and by all Australians working together.
It was agreed that we would all need to make sacrifices and work in harmony if Australia were to recover.
We have made those sacrifices, we have worked in harmony and we are now experiencing the early fruits of our efforts.
Now we must advance even further.
We must build upon the foundations that we have, together, so successfully laid .
We must seize the opportunity now to embark upon a new growth path for Australia.
We will do that with this Budget.
OUTLAYS
Mr Speaker, I will now move on to discuss the outlays side of the Budget in more detail.
Budget outlays are estimated to rise by 13.0 per cent in 1984-85, an increase which is lower than the outcome for any year since 1979-80 and follows an increase of 15.6 per cent in 1983-84.
In real terms the estimated outlays growth in 1984-85 is 6.1 per cent, compared with 7.7 per cent in 1983-84 and 6.5 per cent in 1982-83, the last year of our predecessors.
The major part of this financial year’s outlays growth is accounted for by increases in the larger less-discretionary items of expenditure and the full- year effects of programs introduced last year.
In the former category, payments to the States, public debt interest and social welfare entitlements under existing legislation involve virtually automatic increases in outlays.
For 1984-85, two particular items have been of notable importance in terms of their contribution to outlays growth.
First, the full-year operation of Medicare alone contributes 2.2 percentage points of the total 6.1 per cent real growth in outlays.
I mention Medicare because it replaced a tax expenditure in the form of the health insurance rebate and transferred a formerly private expenditure to a direct public outlay.
The introduction of Medicare more than accounts for the increase in outlays as a proportion of GDP over last year.
Secondly, escalating public debt interest payments-the legacy of past Budget deficits and their necessary financing-will contribute a further 1.6 percentage points of that growth in 1984-85.
Other program initiatives taken last year that contribute to increased outlays in 1984-85 include the First Home Owners Scheme, the Community Employment Program and increased funding for social welfare and education.
I outlined earlier some of the new spending initiatives for this year in the social welfare area.
But this Budget also provides for a range of new and expanded initiatives in other areas. I will now discuss the major ones.
Details of individual programs are contained in Statement No. 3 and other Budget Papers; more information will be provided, as appropriate, by the relevant Ministers.
SOCIAL SECURITY AND WELFARE
As I have already announced, the Budget allocates some $430 million to new social welfare programs or improvements in existing programs; these measures have a full-year cost of $683 million.
This package includes an increase in pensions and benefits to individuals, including an increase of over 10 per cent in unemployment and sickness benefits for certain single beneficiaries aged 16 and 17.
It also provides substantial additional assistance to low-income families with children.
Child Care
This Government is also providing increased expenditure on the Children’s Services Program which will increase from $113 million in 1983-84 to about $158 million this year, bringing the increase over the past two years to more than 60 per cent.
Care of the Aged
A New Home and Community Care Program will be negotiated with the States and the Northern Territory to provide care to the aged and to younger disabled persons.
The proposed program would integrate Commonwealth and State activities and involve estimated expenditure by the Commonwealth exceeding $300 million over three years.
Assistance for Aboriginals
Funding for Aboriginal advancement programs administered by the Department of Aboriginal Affairs will be increased by 14 per cent to $234 million.
Priority will be given to improving water, sewerage, housing and other services for Aboriginal communities, including fringe dwellers.
EDUCATION
The Budget provides $4544 million in direct spending on education, representing a real increase of nearly 4 1/2 per cent, the largest in eight years.
The Government’s strong commitment to education is shown by increases for both the tertiary and the schools sectors announced over recent weeks.
Against a background of significant unmet student demands for tertiary places, the increased funding is designed to create an additional 15 000 places in universities and colleges by 1987. In addition, it is estimated that a further 15 000 full-time places will be created in TAFE institutions over the same period.
In recognition of increased student and staff numbers, capital grants for building programs in higher education will increase by 20 per cent to $64.8 million in 1985.
In the schools sector the Government’s 1985 Schools Commission guidelines represent a new era in the Commonwealth’s approach to schools. The Government has decided to provide financial support for all schools according to an eight year plan. This plan provides for Commonwealth recurrent grants to government schools to increase by almost 50 per cent over the eight year period to 1992.
EMPLOYMENT AND TRAINING
The employment situation has improved considerably over the past year and is forecast to improve further in 1984-85.
But the number unemployed is still far too high and our responsibility in this area, especially to the long-term unemployed, remains.
An amount of $1111 million is provided in 1984-85 for labour market and related employment and training programs, double the provision for 1982-83.
Included in this total is expenditure on the Community Employment Program which will increase by 44 per cent to $410 million.
We also propose to develop a national strategy in the field of occupational health and safety, for which $12.1 million is available in 1984-85.
HOUSING
Total outlays from the Budget on housing for this year are estimated at $1252 million, an increase of 21 per cent on 1983-84 and up 69 per cent on funding provided by the previous Government in 1982-83.
$623 million will be provided to the States this year under the Commonwealth State Housing Agreement. This includes a net increase of some $50 million for public and crisis accommodation.
The level of Federal funds provided for this priority area will be over $200 million higher than when the Government came to office.
The increase in funding, together with the renegotiation of the Commonwealth State Housing Agreement, provides the basis for a 10 year program to attack housing-related poverty.
First Home Owners Scheme
The First Home Owners Scheme has been a major success.
Since it was announced, industry activity has increased by about 25 per cent and housing interest rates have fallen significantly.
Against this background the income limits for the scheme have been reviewed for those who contract to buy or build a house after tonight.
The upper income limit of $27,900 will remain unchanged for families, joint applicants and sole applicants with dependent children. A new threshold of $20 000 a year will apply for maximum assistance.
The changes will mean that no family, joint applicant, or sole applicant with a dependent child who is currently eligible will be excluded from assistance.
For sole applicants without dependants, income limits will be half those for other applicants.
In reviewing income limits the Government was concerned to ensure that assistance went to those most in need. The changes to income limits for sole applicants without dependants recognise that they typically have fewer financial commitments than families.
The scheme will continue to give significant support to first home buyers and the housing industry. Expenditure will be $265 million in 1984-85-an increase of over 85 per cent.
This will assist a further 80,000 Australian households into home ownership in addition to the 55,000 first home buyers who were assisted under the scheme last financial year and who will continue to receive assistance this year.
CAPITAL EXPENDITURE AND WORKS
Total Budget payments for capital purposes (including capital grants and advances) are estimated to rise by 11 per cent to about $5630 million.
Expenditure on civil works funded directly from the Budget is estimated at $497 million, an increase of over $168 million on 1983-84.
This includes $127 million in Budget-financed civil works for airports including Brisbane, Perth, Darwin and Canberra.
Major new projects to commence construction this year will include the Adelaide Commonwealth Centre, the Townsville Airport redevelopment and, in the defence program, the Tindal RAAF Base in the Northern Territory.
In the ACT, civil works expenditure in 1984-85 is estimated at $293 million, an increase of $120 million on 1983-84. This includes $109 million for the Parliament House Construction Authority.
POLICIES CONCERNING WOMEN
Later tonight the Prime Minister will table a document setting out in detail an assessment of the impact of this Budget on women.
Let me highlight some of its contents.
Our tax cuts will be of significant benefit to working women.
Our special rebate will ensure that needy women living on benefits will be saved from having to pay tax this financial year.
The Government’s welfare initiatives are generous and women will be the major beneficiaries of our decisions. The Government has paid particular heed to the needs of sole parents, one of the most disadvantaged groups in our society.
The Government has also made provision in this Budget for the Affirmative Action Pilot Program currently being undertaken by 28 of our leading companies and three of our tertiary education institutions. Funds have been provided to allow the newly proclaimed Sex Discrimination Act to operate effectively across Australia.
CULTURE, SPORT AND RECREATION
The Budget provides $340 million to the ABC, an increase of nearly 13 per cent on 1983-84.
The Australia Council is to receive $43.6 million for arts funding, an increase of 14 per cent, and $5.4 million has been provided for the National Institute of Dramatic Art.
The Budget provides $65 million for sport and related programs in 1984-85, an increase of $24 million over last year.
This includes $8.9 million for the Australian Institute of Sport-almost double the funding of two years ago. This has underpinned the facilities and coaching for many of our athletes in the Olympic Games.
A new three year program costing $27 million is proposed for the construction of additional international standard sport facilities in the States and Territories.
INDUSTRY ASSISTANCE AND DEVELOPMENT
Tourism
Reflecting the importance which the Government attaches to the growth and employment potential of this industry, funding for the Australian Tourist Commission will rise by $3.3 million to $22.8 million in 1984-85, bringing the increase over the past two years to 128 per cent.
Research and Technology Transfer
To encourage the introduction of new technologies in Australia’s manufacturing industry, the Government has decided to establish a nation-wide advisory service on computer-assisted manufacturing at a cost of $2 million in 1984-85.
Motor Vehicle Industry
As part of revised assistance arrangements for the motor vehicle industry announced by the Minister for Industry and Commerce in May 1984, the Government will fund a five year program for Australian design and research activities. This year the Government will enter into commitments of up to $20 million for these activities.
Primary Industry
The Government fully recognises the significant contribution of primary industry to the national economy. The funding of wool promotion has at last been put on a secure and predictable basis. This year’s allocation is $26 million, an increase of 30 per cent.
Because of developments in financing by the Australian Wheat Board, the Wheat Finance Fund is to be wound up and returned to growers on 1 July 1985, while growers’ contributions in respect of 1983-84 season deliveries-estimated to exceed $50 million-will be returned within the next few months.
Trade Promotion
An additional $3.4 million is provided for an expanded program of trade promotion activities, taking total expenditure for trade promotion-including the overseas promotion of rural products-to a level 36 per cent above that for 1983- 84.
The increased funding will permit an intensified effort in the Japanese, Chinese and North American markets. Emphasis will be accorded to the promotion of high technology, and co-funding of trade promotion activities initiated by the States will also be undertaken.
Funding under the Export Market Development Grants Scheme, which was increased by $10 million in 1983-84, has been increased by another $10 million to $125 million.
Sufficient funds have been provided to meet all outstanding claims under the Export Expansion Grants Scheme which will be wound up this year following its termination by the previous Government.
TRANSPORT
Roads
Grants to the States and the Northern Territory for roads will total $1245 million in 1984-85, an increase of 46 per cent or $394 million on the level of two years ago.
Bass Strait Passenger Services
A grant of $25 million is to be paid to Tasmania to complete the purchase of a replacement for the ”Empress of Australia”. This will include costs associated with the upgrading of associated facilities.
The Tasmanian Government will subsequently assume responsibility for the service.
DEFENCE
The Budget provides $5820 million for defence, an increase of 8.1 per cent on 1983-84 outlays; the adjusted underlying real increase will be about 3.3 per cent.
REVENUE MEASURES
I referred earlier to the personal income tax cut and to some of the other revenue measures contained in this Budget.
I now elaborate a little; additional details are being released separately.
Medicare Levy
In order to continue to shelter low income earners from the Medicare levy, the income thresholds at which the levy becomes payable are to be increased from 1 July 1984.
For single persons the threshold will increase to $7110, or about $135 per week .
For married couples and sole parents the threshold rises to $11 803, plus an additional $1330 for each child.
For example, married couples with two dependent children will pay no Medicare levy until their taxable incomes exceed $14 463 per annum-almost $280 per week.
Also reflecting the effects of earnings growth, we have decided to increase the ceiling on the maximum levy payment from $700 to $750 per annum with effect from 1 November 1984.
Social Security Beneficiary Rebates
The Government has decided to introduce special taxation rebates for unemployment, sickness and special benefit recipients. For 1984-85, the maximum rebate will be $50 for single beneficiaries and $75 for married beneficiaries.
This measure will ensure that persons wholly or mainly dependent on these social security benefits do not become liable for income tax.
The maximum amount of rebate will reduce by 12 1/2 cents for each dollar of taxable income in excess of $4783 for a single beneficiary and $7989 for a married beneficiary.
Pensioner Rebate
Following the personal income tax cut, the $250 pensioner tax rebate will now begin to shade out at the higher income of $5534. This means that single pensioners benefiting from the rebate will pay no tax until their income exceeds $106 per week.
Dependent Spouse Rebate
The Government has decided to remove the taxation discrimination whereby a dependent spouse rebate has been available only to taxpayers who are legally married.
With effect from 1 July 1984, eligibility for the dependent spouse rebate will be extended to a de facto spouse.
A housekeeper rebate will no longer be available in respect of a de facto spouse.
Zone Rebates
The basic amounts of income tax zone rebates for people living in remote areas are to be increased by 25 per cent, with effect from 1 November 1984. In a full year, the Zone A rebate will be $270 and the Zone B rebate will be $45.
In special zone areas, the full-year rebate will be $938.
The boundaries of the special zone areas are also to be adjusted to reflect the changes in town populations arising from the 1981 Census results.
This adjustment will only be made, however, where it is to the advantage of taxpayers.
Taxation of Wine
With the introduction of the general sales tax on wine and alcoholic cider mentioned earlier, the present sales taxes applying only to imported alcoholic grape wines and alcoholic cider will be converted to customs duties with effect from 8 p.m. tonight.
However, because of certain GATT obligations in respect of wine, the duties to be applied to imported alcoholic wines will be equivalent to a sales tax of 10 per cent, rather than 20 per cent.
This reduction in protection is not expected to result in any significant increase in wine imports.
Fortifying spirit excise paid or payable in respect of 1983-84 will be refunded in full; this will avoid the double taxation that might otherwise have been borne by fortified wines.
Against this background, an independent inquiry into the grape growing and grape product industry will be held to investigate all aspects of the structure of this industry with a view to making recommendations to government to overcome the industry’s economic and regional problems.
Diesel Fuel
Certain off-road uses of diesel fuel attract a rebate of excise duty of 7.155 cents per litre.
When the system of indexing rates of excise was introduced last Budget, the diesel fuel rebate was left outside the system.
The Government has now decided that the rebate will be indexed, with effect from 1 February 1985.
Aviation Fuel Excises
Excise duties on aviation gasoline and aviation turbine fuel will be increased by 0.25 cents per litre from 8 p.m. tonight.
This measure will help to improve the level of cost recovery from the aviation industry.
Bank Account Debits Tax
Following a review of various aspects of the Bank Account Debits Tax, the Government has decided to permit three additional exemptions from the tax, namely:
* school parents and citizens associations and other support groups for institutions which are themselves exempt;
* non-business local councils and government bodies, except where they conduct substantial business activities; and
* debits of less than $1.
To offset the cost of these further exemptions, the rate of tax on debits of $ 10 000 or more will be increased from $1 to $1.50.
Primary Producers
Two measures relating particularly to primary producers will be introduced.
The scheduled termination date for the immediate deduction for expenditure incurred on fencing to help eradicate bovine brucellosis and tuberculosis in livestock will be extended by two years, to 30 June 1986.
Secondly, the prescribed minimum values for natural increases in livestock, which have applied since 1936, are to be increased.
The new values for 1984-85 and later income years are $1 for sheep, $5 for cattle and horses, and $4 for pigs.
Business Taxes
I indicated earlier that the Government would be introducing significant new tax benefits for business. The transfer of losses within company groups, increased depreciation provisions for non-residential income-producing buildings , and writeoffs for mineral exploration expenditures will all enhance the prospects for a continuing investment recovery in Australia.
The Government recognises that continued reform of the tax system is essential. In the context of its review of the tax laws, careful consideration will be given to the appropriate long-term tax regime for business and investment.
Measures to Counter Avoidance and Evasion
This Government will remain unrelenting in its efforts to counter tax avoidance and evasion.
Additional measures will be taken to strengthen the collection mechanisms for various taxes, including increases in levels of penalty for late payments and other breaches of taxation laws.
The Budget also provides for a significant increase in the compliance staff of the Taxation Office in order to increase the proportion of tax returns subject to audits.
MONETARY POLICY
The overall objectives of monetary policy in 1984-85 will continue to be to provide for strong economic growth while accommodating no more than the minimal cost and price increases that might flow from the effective operation of the Prices and Incomes Accord.
In considering an appropriate monetary projection range, likely changes in the velocity of circulation of money need to be considered, as well as real growth, and the progress that can be made against inflation.
Last year M3 velocity increased by about 6 per cent. Such strong growth is not unusual in the early stages of recovery. In 1984-85, however, velocity is expected to grow at a much more moderate rate of about 1 1/2 per cent.
On this basis, the Government has adopted a conditional projection for M3 growth between the June quarters of 1984 and 1985 of 8-10 per cent.
Monetary projection this year is complicated by a measurement problem. This arises because the removal from 1 August of maturity controls on bank deposits will enable the banks to compete for the first time for deposits which previously had to find a home with non-bank financial institutions.
There is no basis on which to forecast how much of this ”re-intermediation” will occur, but the scope is very large. To the extent that the banks attract deposits from non-bank institutions, M3 will be increased but there will be no change in underlying monetary conditions.
Because of this measurement problem the Government will pay increased attention to broader monetary aggregates, which are less affected by deregulation, and to other indicators of financial conditions.
As information on the extent of re-intermediation becomes available later in the year, we will review the conditional M3 projection. At that time, we will also consider whether the projection should be modified in the light of changes in the economic outlook.
The Government believes that the substantial reduction in the domestic deficit of $1600 million in this Budget, supported by the major reforms instituted at the Loan Council meeting in June, will be welcomed by the financial markets.
This outcome, together with the continuing progress being made against inflation, provides considerable scope for further interest rate falls during 1984-85.
Consistent with the policy outlined above, the Treasury is announcing tonight details of the next bond tender for an amount of $1200 million.
CONCLUSION
Mr Speaker, this Budget will consolidate and strengthen the economic recovery.
Within the context of a significant reduction in the Budget deficit, we have delivered a substantial tax cut and implemented a social welfare package that will be of considerable benefit to needy Australians.
The reduction in the Budget deficit will help to relieve inflation and interest rate pressures.
In turn, the reduction in these pressures will encourage the further strengthening of investment spending essential to economic growth and hence to the well-being of all sections of the community.
The tax cuts will ensure the continuing moderation of wage pressures-moderation that has been central to putting the recovery on a sound footing.
In these ways this Budget will consolidate the recovery, thereby providing scope to pursue stronger economic growth which in turn will enable us to attack the inequities that still abound in our society.
I commend this Budget to the House.
Debate (on motion by Mr Howard) adjourned.
