STATEMENT BY THE PRIME MINISTER TI-E
RT1. H. GON. OR M P. 1. IN THE
HOUEOTKrV 16 FEBRUARY 1971
ECONOMY: REDUCTIONS IN GOVERNMENT EXPE1ITlURE
I recently spoke to the nation on the state of the economy and on the likely
inflationary effects of the Arbitration Commission?' s award of a 6% 0 increase i wages
and salaries.
0 I said in order to decide what action should be taken now Cabinet had sought
to discover the areas in which demand seemed to be growing most strongly. One of
those areas is the public sector, spending by governments, and we believe one of the
eOfnir stht alti naerse ao. f attack on rising costs and prices should be to restrict what is being spent
Vflnen our Budget was introduced last August it was estimated that total
" Commonwealth" expenditure would be 883 million. I diould say here, I think, that
although called Commonwealth expenditure this amount included 708 million for
reimbursement grants and other payments to the States. Indeed such payments mrade
up more than one third of the Commonwealth Budget.
Th-e total was 11. 2 per cent more than the year before. Since that Budget
wa s formulated the Government has been faced with significant additional expenditure.
WIhe National Wage Case decision, and other wage determinations is estimated to add
directly, in the rest of this J. inancial year, $ 88 million to the Commonwealth's own
Wage and Salary Bill in 1970-71.
n II addi i , W~ j wag~ jtp-i inat ions, because they have led to an increase
in average wages/ I/ f requi~ fbimonwealth to pay an additional $ 20 million to
the States under the formula. In addition we will need to pay some $ 58 million to the
States in this financial year to recompense them for the los-, of the receipts duty tax
on which they had budgeted.
Mairly as a result of these two outlays payments to the States are now
expected to exceed the Budget estimates by some $ 83 million. Emergency payments
associated with recent floods will doubtless increase the outlays required. Other
additional demands on our resources since the Budget was brought down include the
provision of $ 12 million as a capital advance to the Australian Wool Commission, and
we believe some $ 6 million will be required this financial year for rural debt
reconstruction and farm adjustment.
We must also expect increases in costs of the material used by the Government
All in all it is estimated by the Treasury that the nett increase in expenditure, since
the Budget was prepared, will amount to approximately $ 242 million, if Departments
were provided with the sums they have asked for. This is the background against
which we have decided that we should make reductions in what would otherwise have
been spent.
Having made a complete and detailed survey of Commonwealth expenditures
we propose to reduce this by scwu--$ 75 milUoi!
in the remaining months of this financial year. These reductions are made across
the whole range of Commonwealth Departments but they do not involve any reduc tions
in our payments to the States.
Our object has been to effect reductions in the Commonwealth expenditures
for its own purposes. We have not sought to achieve this at the expense of the States.
A dissection of the reduction of $ 75 million as between the main categories of
Commonwealth expenditure is provided in the attached table.
I ask leave to have the table incorporated in Hansard. Further details a! the
various reductions will be provided as necessary by individual Ministers. These
reductions are spread right across the board but it will be observed that the areas where
the more substantial savings have been made are defence, capital works and capital
advances, and departmental running expenses. We were particularly anxious to effect
e economies in administrative expenditures, including the overtime and salary expenditures
WOf Commonwealth Departments. At the sanre time we have endeavoured to avoid
reducing expenditures on essential development activities. In more general terms,
we have sought to reduce the contribution of Commonwealth expenditures to total
demand and to curb the Commonwealth's demands on the labour market.
Thus the reductions in departmental expenditures will involve restraint
on Public Service employment. The Public Service Board reported to me that a routine
statistical projection made prior to my instructions indicated an increase in 1970-71,
In full-time employment under the Public Service Act of 4.6% 0 on the numbers employed
at 30 June, 1970. In 1969-70 the comparable increase was 4. 8% 7 whilst the increase in
total civilian and defence forces employment in the community was
The Board advised me that my instructions for restraint : on establishment
Sin creases could benefit the health and soundness of administration in the Commonwealth
WService and it suggested that a limitation ahould be placed on the increase in Service
employment. The Public Service Board has now reported to me that in its discussions with
Departments it has stressed the Government's policy of restraint but has not endeavoured
to impose arbitrary cuts in employment. The Board's recommendation, which has
been L.-cepted. was that Departmental increases in employment, which will be kept to
the minimum, should not exceed at 30th June, 1971 an. overall increase in the Service
of 3.4% 0 as compared with numbers employed under the Public Service Act on 30th Junie
1970. This is a reduction of about 25% 0 on the projected increase in employment
disclosed in the Board's earlier survey. But another way, the Board's original
projection was that the Service would grow by 10, 534 in 1970-7 1. This growth has been
cut by 2, 735. The Commonwealth has, I believe, moved quickly and firmly in the area
available to it. It is necessary to do so. For, as we see it, the best interests of the
community require that inflation shall be overcome and one of the first steps to this
end must be action t o restrain our own expenditures.
REDUCTIONS IN ESTIMATED COMMONWEALTH EXPENDITURES
Defence Services
Payments to or for the States
and Works and Housing
Programmes
National Welfare Fund
Repatriation Services
Debt Charges
Departmental Running
Expenses
Territories ( excl. Papua
and New Guinea)
External Economic Aid ( inc.
Papua and New Guinea)
Commonwealth Payments to
Industry
Other Expenditures
Ad' 7ances for Capital
Purposes -Post Office
-Other
Other Capital Works and
Services T otal1 Expenditures BudZEL
Estimt mill.
1,137.0 708. 1
472.9
313.5 103.9 510.3 96.3
166.2 271.5 412.6 240.0 203. 1
247.3
7,882.7 Revised
Estimat mill.
1,170.6 2,791.6 1,475.8 317.6 99.0
551.0
103. 1
168. 4
285.4 426. 2
262.0 221.8 252.2
8,124.7 Reduction
on Re Vised
Ttitemill, 21.5 .7
1.8
8.8 2.5 3. 8
8.5
5.9
10.0 3.7 8.3
75 5 Latest
Eitlrnate mill.
1, 149. 1
2, 791. 6
1, 475. 1
315.8 99.0
542. 2
100. 6
164.6 276.9 420.3 252.0 218. 1
243.9
8,049.2