PREMIERS' CONFERENCE 11, FEBRUARY 1975
OPENING STATEMENT BY THlE PRIME MINISTER
THlE HON. E. G. WHITLAM, M. P.
WHEN WE MET IN JUNE AND AUGUST LAST YEAR WE WERE
AS lIE HAD TO BE PRE-OCCUPIED WITH INFLATION. AT OUR JUNE
MEETING, I TOLD YOU THAT IF TFE ECONOMIC SITUATION CHANGED
AND IT HAS CHANGED WE WOULD MEET TO LOOK AT IT AGAIN.
INFLATION IS, OF COURSE, STILL TO BE OVERCOME, BUT THERE IS
NOW A TOTALLY UNACCEPTABLE LEVEL OF UNEMPLOYMENT IN THE
SECOND HALF CF 1974 THE ECONOMY TURNED DOWN DRAMATICALLY.
FROM THE BOOM CONDITIONS OF THE FIRST HALF OF 1974, ECONOMIC
ACTIVITY HAS DROPPED SHARPLY AT A R. ATE NON4E OF US COULD
HAVE ANTICIPATED. MOST OTHER DEVELOPED COUNTRIES HAVE, OF
COURSE, HAD A SIMILAR EXPERIENCE OVER THIS PERIOD. REGISTERED
UNEMPLOYMENT HAS RISEN FROM A SEASONALLY ADJUSTED 1 .4 PER CENT
OF THE LABOR FORCE IN JUNE 1974 TO 4.1 PER CENT IN DECEMBER,
THE HIGHEST LEVEL SINCE THE 1930' S. THE INFLATION RATE AS
MEASURED BY THE CHANGE IN THE CONSUMER PRICE INDEX OVER A
YEAR EARLIER ROSE FROM 14.4 PER CENT IN THE JUNE QUARTER TO
16.3 PER CENT IN THE DECEMBER OUARTER OF 1974. SOME CHARTS I
HAVE HAD PREPARED TO ILLUSTRATE THIS SITUATION ARE BEING
HANDED AROUND. THE CURRENT INFLATION ORIGINATED IN EY'TRAORDINARY
AND UNPRECEDENTED DEVELOPMEITTS IN THE ECONOMY IN THE RECENT
PAST. THE PREVIOUS GOVERNMENT, FOR ELECTORAL REASONS,
ALLOWED A RATE OF MONETARY EXPANSION WHICH WAS TOTALLY
UNJUSTIFIABLE IN ITS RAPIDITY AND WHICH WAS MAINLY RESPONSIBLE
FOR THE DEMAND INFLATION OF 1972-73* AND THE INEVITABLE
CONSEQUENCE OF THE CURRENT COST INFLATION. THIS IS SOMETHING
WHICH SHOULD NOT BE FORGOTTEN AS WE ANALYSE OUR PRESENT
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DIFFICULTIES. I ACKNOWLEDGE THAT OUR CURRENT INFLAT ION HAS
BEEN PUSHED ALONG BY WAGE INCREASES THAT HAVE FAR OUTPACj3' D
THE ABILITY OF FIRMS TO ABSORB THROUGH PRODUCTIVITY INCREASES
OR, IN THE PREVAILING ECONOMIC CLIMATE, TO PASS ON IN TER"-MS
OF EVEN HIGHER PRICE RISES. THE RESULT HAS BEEN A SUBSTANTIAL
SQUEEZE ON PROFITS WHICH HAS LED TO A CUT-BACK IN THE SCALE
OP' ACTIVITY AND THE POSTPONEMENT OF MANY INVESTMENT PROJECTS.
THUS THE INFLATIONARY MENACE REMAINS A PRIME CONCERN NOT LEAST
BECAUSE IT HAS BECOME INEXTRICABLY BOUND--UP IN THE PROBLEM
OF UNEMPLOYMENT. TO ACHIEVE A LASTING IMPROVEMENT IN THE UNEMPLOYMENT
SITUATION, AS WE ARE TOTALLY COMMITTED TO DOING, WE ARE
DIRECTING OUR ATTENTION TO THIS BASIC ISSUE. WE CAN, IN THE
SHORTER-TERM, MAKE SOME INROADS INTO THE UNEMPLOYMENT PROBLEM
AND THAT, OF COURSE, IS THE MAIN REASON WE ARE MEETING TODAY.
BUT IN MAKING DECISIONS TODAY WE MUST DO SO IN A MANNER THAT WILL
NOT MAKE THlE PROBLEM OF INFLATION MORE UNMANAGEABLE.
GENTLEMEN, THIS WAS THE CONTEXT IN WHICH IT WAS
AGREED TO PROPOSE THIS MEETING. LET M E REPEAT PART OF THE
MESSAGE I SENT TO YOU:
" IT IS ENVISAGED THAT DISCUSSION WOULD CENTRE ON:
THE AMOUNT AN) FORM OF ADDITIONAL FINANCIAL
ASSISTANCE WHICH STATE GOVERNMENTS, STATE
SEMI-GOVERNMENTAL AND LOCAL AUTHORITIES
REQUIRE TO RETAIN OR RE-ENGAGE EMPLOYEES, AND
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THlE REPORTS OF THE WORKING PARTIES OF
AUSTRALIAN AND STATE GOVERNMENT OFFICIALS
ON POSSIBLE JOINT ACTION TO RESTRAIN
INFLATIONARY PRESSURES...".
I PROPOSE WE CONCENTRATE FIRST ON DISCUSSION OF ITEM
THE WORDS WERE, I EMPHASISE, CAREFULLY CHOSEN TO INDICATE
ACCURATELY THE BASIS OF OUR APPROACH. IN THIS MATTER WE
ARE FOCUSSING ON UNEMPLOYMENT; ACCORDINGLY OUR PRIMARY
CONCERN IS TO ASSESS THE EMPLOYMENT EFFECTS OF YOUR PROPOSALS.
MY GOVERNMENT HAS, AS YOU ARE AWARE, TAKEN
ACTION THROUGH MONETARY POLICY TO ENSURE THAT LIQUIDITY
IS MUCH FREER AND BANK LENDING CAN BE MAINTAINED AT A
LEVEL SUFFICIENT TO MEET THE IMMEDIATE NEEDS OF THE
COMMUNITY FOR FINANCE.
WE HAVE ADDED SUBSTANTIALLY TO OUR DIRECT
OUTLAYS IN A WAY THAT WILL ENHANCE EMPLOYMENT PROSPECTS.
PERSONAL INCOME TAX RATES HAVE BEEN SUBSTANTIALLY REDUCED
TO. ENCOURAGE CONSUMER SPENDING AND TO HELP OFFSET THE
PRESSURE FOR WAGE DEMANDS. COMPANY TAX RATES HAVE ALSO
BEEN REDUCED AND SPECIAL PROVISIONS RELATING TO DEPRECIATION
ALLOWANCES HAVE BEEN INTRODUCED TO IMPROVE COMPANY PROFITABILITY.
SPECIFIC MEASURES HAVE BEEN TAKEN TO ALLEVIATE THE IMMEDIATE
PROBLEMS OF CERTAIN INDUSTRIES INCLUDING IMPORTANTLY THE
MOTOR VEHICLE INDUSTRY.
THE ACCELERATION IN COSTS THAT IS EVIDENT IN THE
COMMUNITY AT LARGE HAS, OF COURSI', ALSO CREATED LARGE PROBLEMS
FOR THE STATES AND) THEIR AUTHORITIES WHICH IMPINGE DIRECTLY
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ON THE LEVELS OF EMPLOYMENT THEY CAN SUSTAIN. I ThI1NK
YOU WILL AGREE WITH THAT, AND ACCORDINGLY I THINK YOU
WILL AGREE WITH ME WIhEN I EMPHASISE THAT WE SHOULD
APPROACH THE IMMEDIATE PROBLEMS, AS FAR AS IS PRACTICABLE,
IN A WAY THAT WILL NOT EXACERBATE THE PROBLEM OF INFLATION.
WE HAVE TAKEN THAT AS AN ESSENTIAL FACTOR IN OUR CONSIDERATION.
AS TO THE UNEMPLOYMENT PROBLEM, IT IS NOT SIMPLY
A MATTER OF ALJLOCATING MORE FUNDS FROM THE BUDGET OR SIMPLY
TRYING TO SPEND MORE MONEY. THE SITUATION IS MUCH MORE
COMPLEX THAN THAT. INCREASED EXPENDITURE MUST BE AIMED AS
DIRECTLY AS POSSIBLE AT UNEMPLOYMENT. AT THE SAME TIME WE
WILL NOT ACHIEVE OUR EMPLOYMENT OBJECTIVES IN THE LONGER
TERM IF WE CANNOT CURB INFLATION.
ON 28 JANUARY I ANNOUNCED THAT THE GOVERNMENT
HAS DECIDED TO ESTABLISH A SPECIAL COMMITTEE OF MINISTERS
TO REVIEW CONTINUING GOVERNMENT EXPENDITURE PROGRAMS AND
TO EXAMINE ALL FUTURE EXPENDITURE PROPOSALS WHICH COME
BEFORE IT. I QUOTE NOW FROM THE STATEMENT OF 28 JANUARY:
" THE GOVERNMENT HAS DECIDED THAT THERE OUGHT TO
BE A GENERAL PRESUMPTION AGAINST FURTHER INCREASES OF
GOVERNMENT EXPENDITURE. ANY SUCH INCREASE MUST MEET
THE CRITERIA ADOPTED BY CABINET" AND FURTHER:
" THE COMMITTEE WILL GIVE CAREFUL CONSIDERATION
TO THE RELATIONSHIP BETWEEN EMPLOYMENT AND INFLATION.
IT WILL ENSURE THAT GOVERNMENT EXPENDITURES ARE
DIRECTED TO THE EMPLOYMENT OR RE-EMPLOYM'ENT OF
PEOPLE WITHOUT AGGRAVATING INFLATIONARY FORCES.
PROPOSALS AIMED DIRECTLY AT PREVENTING SIGNIFICANT
RETRENCHMENTS WOULD HIAVE A HIGH PRIORITY AND BECAUSE
MOST JOBS THREATENED ARE IN THE PRIVATE SECTOR,
THIS APPLIED PARTICULARLY TO THAT SPHERE IN THE
ECONOMY." THE STATEMENT CONCLUDED AS FOLLOWS:
" SUPPORT FOR STATE AND LOCAL GOVERNMENT EXPENDITURE
WILL BE EXAMINED WITH CARE TO ENSURE THE CAPACITY AND
WILLINGNESS OF THE STATE OR LOCAL GOVERNMENT AUTHORITIES
TO USE FUNDS PROVIDED BY THE AUSTRALIAN GOVERNMENT,
WITHIN THE APPROPRIATE TIME SPAN."
THAT STATEMENT OF 28 JANUARY WAS NOT MADE LIGHTLY. IT
WILL ESTABLISH THE POINT IF I TELL YOU THAT ON THE BASIS
OF OUR LATEST ESTIMATES WE FACE A VERY HEAVY DEFICIT IN
OUR BUDGET FOR 1974-75. IT WOULD CLEARLY BE A COMPLETELY
WRONG ASSUMPTION FOR ANYONE TO MAKE, THAT THERE IS MUCH
LEFT TO BE SQUEEZED OUT OF OUR BUDGET THIS YEAR -ANY "-ONS",
AS THEY SAY, WILL NEED TO BE MATCHED BY " OFFS" -THAT WILL
BE PART OF THE ROLE OF THE NEW EXPENDITURE COMMITTEE. THE
POINT IS THAT ANY ASSISTANCE WHICH MY GOVERNMENT PROVIDES
TO THE STATES WILL HAVE TO BE ADDED TO OUR BUDGET DEFICIT.
IN THESE CIRCUMSTANCES WE ARE ENTITLED TO HAVE THE CLEAREST
JUSTIFICATION FOR ADDING TO OUR DEFICIT.
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THE NEXT DAY, ON 29 JANUARY, I ASKED IN MY MESSAGE
YOU COULD PROVIDE URGENTLY SUCH INFORMATION NOT
ALREADY AVAILABLE TO US AS WOULD ASSIST IN AN ASSESSMENT
OF YOUR STATE'S NEEDS FOR FINANCIAL ASSISTANCE INCLUDING
ASSISTANCE FOR ROADS IN ACCORDANCE WITH THE CRITERION
OUTLINED" EARLIER IN THE MESSAGE.
OUR ASSESSMENT OF YHAT ASSISTANCE SEEMS APPROPRIATE
TO ENABLE YOUR GOVERNMENTS AND SEMI-GOVE~ RNMENTAL AND LOCAL
AUTHORITIES TO RETAIN OR RE-ENGAGE EMPLOYEES, HAS BEEN MADE
AS IT PROPERLY HAD TO BE MADE ON THE BASIS OF THE
INFORMATION YOU HAVE PROVIDED TO US IN YOUR LETTERS AND
YOUR DISCUSSIONS WITH THE TREASURER. WE DO READ THE
NEWSPAPERS, OF COURSE, AND THEY HAVE WRITTEN MUCH IN RECENT
DAYS ABOUT WHAT THE STATES NEED OR SAY THEY NEED. BUT I
THINK YOU WILL ALLOW THAT SUCH REPORTS AS THEY PURVEY COULD
SCARCELY BE A BASIS FOR SERIOUS CONSIDERATION BY US ALONGSIDE
THE INFORMATION YOU HAVE PROVIDED TO US DIRECTLY.
THE INFORMATION YOU HAVE ALREADY FURNISHED
REGARDING THE PROBLEMS YOU FACE IN THE MAINTENANCE OR
RESTORATION OF EMPLOYMENT MAKE IT CLEAR THAT ALL THE STATES'
BUDGETS HAVE SUFFERED FROM THlE EFFECT OF INCREASES IN WAGE
-AND SALARY RATES, AN~ n OTHER COSTS. IN ALL STATES, THE SEMIGOVERNMENT
AUTHORITIES HAVE FACED THE SAME DIFFICULTIES ON
THIS SCORE AS HAVE THE STATES THEMSELVES; CLEARLY THEIR
COSTS HAVE RISEN MUCH MORE THAN THE 12 PER CENT INCREASE
IN THEIR BORROWING PROGRAMS WHICH THE LOAN COUNCIL AGREED
LAST JUNE. IN ALL STATES ALSO SPENDING ON ROADS HAS BEEN
AFFECTED 13Y RAPIDLY RISING COSTS.
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OUR PROPOSALS WHICH I SHALL PUT TO YOU ARE IN
THEIR PARTICULAR FORM ANT) MAGNITUDE, A RESPONSE TO THESE
PARTICULAR CIRCUMSTANCES. THEY DO NOT REPRESENT ON-GOING
ARRANGEMENTS, THE PROPOSALS RELATE TO THE PRESENT THEY
ARE TAILORED TO THE PRESENT UNEMPLOYMENT DIFFICULTIES.
THE PREMIERS OF NEW SOUTH WALES, VICTORIA,
QUEENSLAND AND WESTERN AUSTRALIA HAVE PROPOSED THAT
$ 300 MILLION BE ALLOCATED TO THE STATES FOR REDUCING
CHARGES WHICH BEAR DIRECTLY ON THE COST-OF-LIVING. THIS
PROPOSAL, WHICH IS REALLY A REPETITION OF ONE DISCUSSED
LAST AUGUST, HAS BEEN CONVEYED TO ME IN A LETTER FORWARDED
TO ME BY THE PREMIER OF VICTORIA. I DO NOT THINK PREMIERS
WILL BE SURPRISED, PARTICULARLY IN THE LIGHT OF OUR EARLIER
DISCUSSION, WHEN I SAY THAT THIS PROPOSAL IS NOT ONE THAT
APPEALS TO US.
I RE-EMPHASISE THE POINT I MADE THAT WE ARE
PREPARED TO PROVIDE ADDITIONAL FINANCIAL ASSISTANCE TO THE
STATES WHICH WILL HELP WITH THE IMMEDIATE PROBLEM OF
UN EMPLOYMENT; AND WE ARE PREPARED TO ADD TO OUR ALREADY
LARGE DEFICIT FOR THIS FINANCIAL YEAR TO THAT END. WE DO
NOT SEE IN THE PROPOSED ALLOCATION OF $ 300 MILLION FOR
REDUCTION OF CHARGES, A POTENTIAL CONTRIBUTION TO THE
SHORT-TERM UNEMPLOYMENT PRCBLEM WHICH WOULD JUSTIFY SUCH
AN ADDITION TO OUR DEFICIT.
AGAINST THAT BACKGROUND AND SUBJECT TO My
GOVERNMENT'S CONSIDERATION OF THE ADDITIONAL INFORMATION
REQUESTED IN MY MESSAGE OF 12 FEBRUARY, THE AUSTRALIAN
GOVERNMENT IS PREPARED TO PROVIDE SUBSTANTIAL AMOUNTS OF
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ADDITIONAL FUNDS TO THE STATES IN 1974-75 FOR EMPLOYMENT
PURPOSES. A DOCUMENT DETAILING O{ JR PROPOSALS WILL BE
CIRCULATED. VERY BRIEFLY, THE AUSTRALIAN GOVERNMENT IS
PREPARED TO SUPPORT THE PROVISION OF ADDITIONAL FUNDS FOR
THE STATES AND THEIR AUTHORITIES IN 1974-75 TOTALLING
$ 210 MILLION. THIS IS MADE UP AS FOLLOWS:-
ADDITIONAL GENERAL REVENUE GRANTS OF $ 60 MILLION;
ADDITIONAL STATE GOVERNMENT LOAN COUNCIL PROGRAMS
OF $ 60 MILLION;
ADDITIONAL BORROWING ALLOCATIONS FOR LARGER STATE
AUTHORITIES OF $ 40 MILLION;
ADDITIONAL EMPLOYMENT GRANTS OF
$ 30 MILLION FOR ROADS
$ 20 MILLION FOR GENERAL EMPLOYMENT PURPOSES.
THE PRECISE BASES ON WHICH THE ASSISTANCE WILL
BE MADE AVAILABLE ARE SET OUT IN THE DOCUMENT TO BE CIRCULATED.
THERE IS ONE OTHER STATISTIC I MIGHT MENTION HERE.
TAKING. INTO ACCOUNT THE ADDITIONAL FUNDS TO WHICH I HAVE
REFERRED, AGGREGATE AUSTRALIAN GOVERNMENT PAYMENTS TO THE
STATES IN 1974-75 ARE NOW ESTIMATED AT ABOUT $ 6,420 MILLION
AN INCREASE OF NO LESS THAN 47 PER CENT OVER LAST YEAR. I
SHOULD POINT OUT THAT THIS TOTAL INCLUDES A FURTHER ADJUSTMENT
OF $ 23 MILLION TO THE FINANCIAL ASSISTANCE GRANTS, ARISING
FROM REVISED ASSUMPTIONS FOR POPULATION AND AVERAGE WAGES.
I CAN ASSURE YOU, HOWEVER, THAT IN IT WE HAVE
ENDEAVOURED AS EFFECTIVELY AS POSSIBLE TO MEET THE VARIOUS
NEEDS AND OBJECTIVES WITH THE MOST APPROPRIATE AMOUNTS AND
FORMS OF ASSISTANCE, TA KING FULLY INTO ACCOUNT TH-E COMPREHEl-NSIVE
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DATA YOU HAVE SUPPLIED. WE HAVE ALSO KEPT IN MIND OUR
OVER-RIDING OBJECTIVE OF COMBATING EXCESSIVE INFLATION AND
EXCESSIVE UNEMPLOYMENT.
REPORT OF THE WORKING PARTIES ON INFLATION
I TURN NOW TO THE SECOND ITEM ON OUR AGENDA THE
REPORTS OF THE WORKING PARTIES OF AUSTRALIAN AND STATE GOVERNMENT
OFFICIALS ON POSSIBLE JOINT ACTION TO RESTRAIN INFLATIONARY
PRESSURES. THIS SECOND AGENDA ITEM BRINGS US TO THE OTHER
MAJOR PROBLEM AREA FACING AUSTRALIA TODAY, THAT IS INFLATION
A PROBLEM WHICH M4AY IN THE LONG TERM BE MORE PERMANENTLY
DAMAGING TO OUR WAY OF LIFE THAN THE UNEMPLOYMENT LEVELS
WHICH ARE TROUBLING US SO MUCH TO-DAY.
TO SUCCESSFULLY TACKLE INFLATION WE NEED A NATIONAL
ALL-AUSTRALIAN EFFORT BASED ON THE CO-OPERATION OF ALL THE
PARTIES IN OUR FEDERAL UNION.
AT OUR CONFERENCE, HERE, ON 13 AUGUST LAST YEAR,
ALMOST EXACTLY SIX MONTHS AGO, AS PART OF OUR OVERALL STRATEGY
TO THIS END, WE ESTABLISHED FIVE WORKING PARTIES OF AUSTRALIAN
AND STATE GOVERNMENT OFFICIALS TO EXAMINE AREAS WHERE JOINT
ACTION BY ALL OUR GOVERNMENTS MIGHT BE TAKEN TO RESTRAIN
INFLATIONARY PRESSURES.
THE WORKING PARTIES EXAMINED AREAS OF:
STATE LEGISLATION TO SUPPORT THE JURISDICTION
OF THE PRICES JUSTIFICATION TRIBUNAL.
TENDERING PROCEDURES FOR GOVERNMENT CONTRACTS.
THE POSSIBILITY OF INTRODUCING TAXATION PENALTIES
ON EXCESSIVE WAGE INCREASES.
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JOINT ACTION BEFORE WAGE FIXING TRIBUNALS TO LIMIT
WAGE INCREASES.
MEASURES TO REDUCE THE MULTIPLICITY OF WAGE FIXING
TRI BUNALS.
IN THE MAIN, THESE REPORTS WHICH WERE DISTRIBUTED
TO YOU BY 18 SEPTEMBER, REFLECT IN VARYING DEGREES AGREEMENT
BETWEEN OUR OFFICERS ON WAYS AND MEANS OF ACHIEVING CONCERTED
ACTION ON IMPORTANT NATIONAL PROBLEMS. THEY ARE, THEREFORE,
WORTHY OF OUR SERIOUS CONSIDERATION AS A POSSIBLE BASIS FOR
CO-OPERATION BETWEEN US IN THE FIELDS CONCERNED.
I HAVE RECEIVED COMMENTS FROM MOST OF YOU ( YOUR
RESPONSES ARE SUMMARISED IN A TABLE I AM CIRCULATING). IN
SOME CASES, YOU HAVE HAD LITTLE COMMhENT TO MAKE ON THESE REPORTS,
OR HAVE INDICATED THAT YOU WISHED TO DISCUSS THE FINDINGS OF
THESE COMMITTEES AT A PREMIERS' CONFERENCE. I VERY MUCH
APPRECIATE THE DETAILED CONSIDERATION THAT MANY OF YOU HAVE
GIVEN TO THE REPORTS.
ON THE BASIS OF YOUR VIEWS, I AM HOPEFUL THAT WE
WILL BE ABLE TO REACH AGREEMENT TODAY ON THE MORE IMPORTANT
CONCLUSIONS REACHED IN SOME OF THESE REPORTS.
ADDITIONALLY, ON 21 AUGUST THE PREMIER OF VICTORIA
WROTE TO ME SUGGESTING, INTER ALIA, THAT A WORKING PARTY SHOULD
BE ESTABLISHED TO EXAMINE THE PRACTICABILITY OF LEGISLATION BY
THE STATES TO EXTEND THE SCOPE OF THE LEGISLATION OF THE
AUSTRALIAN PARLIAMENT FOR THE CONTROL OF RESTRICTIVE TRADE
PRACTICES. I SUPPORTED THIS SUGGESTION AND IN TURN SUGGESTED
TO ALL OF YOU ON 16 SEPTEMBER 1974 THAT WE SHOULD ESTABLISH
SUCH A WORKING PARTY. THE PRlEMIERS OF SOUTH AUSTRALIA, WVESTERN
AUSTRALIA AND TASMANIA HAVE ALREADY AGREED TO THIS PRO1POSAL AND
11
THE OTHER PREMIERS HAVE THIS MATTER STILL UNDER CONSIDERATION.
SOME WORK ARISING OUT OF THE PREMIERS' CONFERENCE OF 10 MAY
1973 HAS ALREADY BEEN DONE IN THIS REGARD AND SUBJECT TO YOUR
AGREEMENT I PROPOSE THAT WE NOW ESTABLISH A WORKING PARTY TO
EXAMINE THIS QUESTION.
I REFER FIRST TO THE REPORT ON THE QUESTION OF STATE
LEGISLATION TO SUPPORT THE JURISDICTION OF THE PRICES
JUSTIFICATION TRIBUNAL. SINCE THIS REPORT WAS COMPLETED,
THERE HAD, OF COURSE, BEEN A MARKED, A ND LARGELY UNANTICIPATED,
CHANGE IN ECONOMIC CONDITIONS AS IS ILLUSTRATED IN THE CHARTS
I HAVE CIRCULATED. UNEMPLOYMENT HAS JUMPED TO A HIGH LEVEL
MAINLY AS A RESULT OF A SEVERE SQUEEZE ON PROFITS. THIS IN
TURN HAS ARISEN FROM THE RELATIVE SUCCESS OF THE MEASURES WE
HAVE TAKEN TO RESTRAIN THE GROWTH IN PRICES, IN THE FACE OF A
CCNTINUED ACCELERATION IN WAGES.
AS YOU WILL BE AWARE, LAST NOVEMBER I MADE A SUBMISSION
IN WRITING TO THE CHAIRMAN OF THlE PRICES JUSTIFICATION TRIBUNAL
TO INDICATE THE AUSTRALIAN GOVERNMKENT'S VIEW THAT, IN PRESENT
ECONOMIC CIRCUMSTANCES, THE TRIBUNAL SHOULD GIVE PARTICULAR
ATTENTION TO THE PROBLEMS OF SUSTAINING AND STIMULATING AN
ADEQUATE LEVEL OF PRIVATE INVESTMENT. I BELIEVE THAT THE
TRIBUNAL HAS BEEN DOING THIS AND, INDEED, THAT IT HAD ALREADY
TAKEN SOME STEPS IN THIS DIRECTION PRIOR TO MY SUBMISSION.
I CONSIDER THAT THE ADOPTION AT THIS STAGE OF PROPOSALS
TO STRENGTHEN THE TRIBUNAL'S ROLE COULD EASILY BE MISUNDERSTOOD
ANT) COUNTERPRODUCTIVE FOR OUR PRIME AIM OF RESTORING FULL
RvIP[ LOYMI. NT. RATHER THIAN PROCEED ING WITH ThE-IM NOW, 1. SUGGET WAfi'
LEAVE THEM FOR FUTURE CONSIDERATION IF CIRCUMSTANCES SHOULD SO
I
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WARRANT. I WISH, HOWEVER, TO TAKE THIS OPPORTUNITY TO RAISE
AGAIN WITH YOU THE SUBJE~ CT OF LAND PRICES, WHICH IS OF GREAT
CONCERN TO MY GOVERNMENT. AS EARLY AS 27 DECEM1BER 1972 I
WROTE TO ALL STATE PREMIERS SEEKING THEIR CO-OPERATION ON
TIS IMPORTANT ISSUE, WHICH IS AN AREA IN WHICH THE STATES
HAVE THE PREDOMINANT POWERS. YOU WILL RECALL THAT I RAISED
IT AGAIN AT THE FIRST PREMIERS' CONFERENCE I CHAIRED ON 10 MAY
1973 AND SOUGHT THE CO-OPERATION OF ALL STATES TOWA12DS THE
ESTABLISHMENT OF STATE LAND COI% 2ISSIONS TO PARTICIPATE ACTIVELiY
IN THE LAND MARKET AND TO INCREASE THE FLOW OF RESIDENTIAL
LAND AT REASONABLE PRICES. I CONTINUE TO BE CONCERNED THAT ALL
POSSIBLE ACTION SHOULD BE TAKEN BY THE STATES TO INCREASE THIE
SUPPLY OF LAND AND LIMIT THE RATE OF INCREASE IN RESIDENTIAL
LAND PRICES. THE WORKING PARTY WHICH EXAMINED TENDERING PROCEDURES
FOR GOVERNMENT CONTRACTS NOMINATED SEVERAL AREAS WHERE EFFECTIVyE
ACTION COULD REDUCE THE LEVEL OR RATE OF INCREASE IN BUILDING
AND CONSTRUCTION COSTS FOR GOVERNMENT WORKS. MY GOVERNMENT S W'RONGLY
SUPPORTS THE WORKING PARTY RECCMYIENDATION THAT INCREASED
CO-ORDINATION AND CO-OPERATION AT THE GOVERNM4ENTAL, DEPARTMENT AND
INDUSTRY/ TRADE UNION LEVEL CAN ACHIEVE INTER ALIA:
AN AVOIDANCE OF INDUSTRY RESOURCE UTILIZATION
EXTREMES AND THE STIMULATION AND
RATIONALISATION OF COMPETITION IN THE FIELD
BY REGULATING THE VOLUME AND TYPE OF
CONSTRUCTION WORK.
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THIS, I SUGGEST HAS PARTICULAR IMNPACT WHEN
CONSIDERED ON A REGIONAL BASIS.
A REDUCTION IN INFLATIONARY EXPECTATION
ELEMENTS OF CONTRACT TENDERS FOR GOVERNMENT
WORKS. REDUCED OVERHEAD AND HOLDING CHARGES FOR
GOVERNMENT CONTRACTORS.
I SUGGEST THAT WE NOW ASK THE WORKING PARTY TO FRAME PRACTICAL
PROPOSALS WITH A VIEW TO AN EARLY MEETING OF RELEVAiNT MINISTERS.
WITH REGARD TO THE WORKING PARTY ON TAX PENALTIES
ON COMPANIES THAT GRANT EXCESSIVE WAGE INCREASES I SOUGHT YOlUR
COMMENTS ON THE REPORT PREPARED BY OUR OFFICIALS IN SEPTEMBER
1974. NOT ALL THE PREMIERS HAVE PROVIDED COMMIENTS. THOSE WHO
HAVE, HAVE EXPRESSED DIFFERING VIEWS. SOME OF YOU HAVE
RECOGNISED THE ADMINISTRATIVE DIFFICULTIES AND ANOMALIES BOUND
UP IN ANY SCHEME OF TAX PENALTIES.
THE AUSTRALIAN GOVERNMENT HAS ITSELF HAD THIS COMPLEX
ISSUE EXAMINED BY A CCMMITTEE UNDER THE CHAIRMANSHIP OF DR COOMBS.
THE CCMMITTEE'S REPORT, WHICH I MADE PUBLIC ON
21 OCTOBER 1974, UNANIMOUSLY EXPRESSED THE VIEW THAT A PENAL
TAX OF THE KIND ENVISAGED dOULD BE ADMINISTERED AT CONSIDERABLE
COST, BUT ONLY IF THE SCHEME WERE CONFINED TO A FEW THOUSAND
LARGE FIRMS. THE COMMITTEE WENT ON TO SAY THAT EVEN THEN THE
SCHEME WOULD INEVITABLY CREATE SERIOUS ANOMALIES AND INEQUITIES
AND WOULD CREATE DIFFICULTIES IN RELATIONS BETWEEN BUSINESS AND
TIHE TAX AUTHORITIES AND) ALSO BETI1IEN EMPLOYERS AN]) E,' PLOYEES A\)
TIAT COULI 1, I; AJ) ' rT O SON I UJSSr NI.-;: S; ' A TiUTI i
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THE GOVERNMENT'S VIEW IS THAT THE INTRODUCTION OF A
PENALTY TAX SCHEME WOULD BE INAPPROPRIATE IN PRESENT
CIRCUMSTANCES WHEN ECONOMIC ACTIVITY IS AT A LOW LEVEL. THE
AUSTRALIAN GOVERNMENT DOES NOT WISH TO TAKE ANY ACTION WHICH
WOULD DISCOURAGE THE EXPANSION OF EMPLOYMENT OPPORTUNITIES.
THERE WERE ALSO TWO WORKING PARTIES ON WAGES MATTERS.
ONE WAS ON ACTION TO LIMIT INFLATIONARY WAGE INCREASES; SOME OF
YOU HAVE ALREADY COMMENTED ON ITS REPORT. THE OTHER, ON PRACTICAL
STEPS TO REDUCE THE MULTIPLICITY OF WAGE FIXING TRIBUNALS, IS
STILL AT WORK, ALTHOUGH A SECOND INTERIM REPORT HAS NOW BEEN
PRODUCED. I SUGGEST THAT OUR LABOR MINISTERS MEET TO CONSIDER
THE REPORT AND I CONSIDER THAT WE SHOULD TAKE THIS OPPORTUNITY
TO AGREE TO URGE THEM TO EXPEDITE THEIR WORK IN THIS FIELD.
AS I SAID EARLIER, THE PRESENT SEVERE SQUEEZE ON PROFITS
AND THE RESULTANT UNEMPLOYMENT HAS ARISEN PARTLY FROM THE
RELATIVE SUCCESS OF THE MEASURES WE HAVE TAKEN TO RESTRAIN THE
GROWTH IN PRICES, IN THE FACE CF A CONTINUED ACCELERATION IN WAGES.
IN MAKING THAT STATEMENT WHICH I BELIEVE HAS
WIDESPREAD ACCEPTANCE I DC NOT SEEK TO APPORTION BLAME. THE
PRESENT SITUATION HAS ARISEN OUT OF OUR EXISTING INSTITUTIONAL
ARRANGEMENTS AND THE BREAKDOVN; OF ESTABLISHED METHODS OF WAGE
FIXATION. IT HAS OCCURRED WILLY NILLY OF THE GOOD INTENTIONS
CF THOSE ARBITRATORS AND EMPLOYERS, AS WELL AS UNIONS AND
INDIVIDUAL WAGE EARNERS WHO HAVE BEEN DIRECTLY INVOLVED. THE
PROBLEM HAS BEEN TOO LARGE FOR INDIVIDUALS TO DEAL WITH. OUR
ROLE, AS GOVERNMENTS, IS TO DO WHAT WE CAN TO RESTORE A FRAMEVORK
IN WHICH ORDER CAN BE RE-ESTABLISHED IN THE WAGES AREA.
IN ACCORDANCE WITH ITS TERMS OF REFERENCE, TH]; E WORKING
PARTY WE ESTABLISHED) ON ACTION TO LIMIT INFLATIONARY VAGE INCIREAi::.
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TOOK THE INTRODUCTION OF WAGE INDEXATION AS ITS STARTING POINT.
WHETHER OR NOT WAGE INDEXATION WILL BE INTRODUCED IS OF COURSE
A MATTER WIICH IS BEING FULLY DEBATED IN THE PROPER ARENA
BEFORE THE ARBITRATION COMMISSION BY ALL THE INTERESTED PARTIES,
AND THE COMMIISSION WILL IN DUE COURSE ANN. OUNCE ITS DECISION.
NEVERTHELESS, WHATEVER THE NATURE OF THE COMMISSION'S
DECISION, WE M1ST ALL RECOGNISE THAT WE WILL STILL BE CONFRONTED
WITH A SERIOUS SITUATION ON THE WAGES FRONT. IF TIE COMMISSION
DECIDES TO INTRODUCE AUTOMATIC INDEXATION OR ADOPTS SOME
INTERMEDIATE COURSE, UNDER WHICH ADJUSTMENTS FOR PRICES WOULD
BE REGULAR BUT NOT NECESSARILY AUTOMATIC, THEN OUR PRIME CONCERN
MUST BE TO ENSURE THAT THIS DOES NOT JUST BECOME AN ADDITIONAL
TIER TO WAGE FIXATION. WE CANNOT AFFORD A FURTHER NEW ROUND OF
WAGE INCREASES ON TOP OF WAGE INDEXATION. ON THE OTHER HAND,
IF THE COMMISSION DECIDES TO MAKE NO CRANGE TO THE EXISTING
SYSTEM OF WAGE FIXATION, OUR CONCERN WILL BE TO ENSURE THAT THE
EXPERIENCE OF 1974 IS NOT REPEATED AND THAT WAGE INCREASES ARE
KEPT WITHIN BOUNDS THAT WILL NOT FURTHER EXACERBATE UNEMPLOYMENT
AND INFLATION.
REVIEW OF GENERAL REVENUE GRANTS
BEFORE CONCLUDING, THERE ARE SOME POINTS I SHOULD MAKE
ABOUT THE REVIEW OF GENERAL REVENUE ASSISTANCE ARRANGEMENTS TO
WHICH WE ARE COMMITTED BEFORE THE END OF THIS FINANCIAL YEAR.
PREM1IERS WILL RECALL THAT I WROTE TO THEM ON 20 NOVIZ'IBER
LAST INVITING THEIR VIEWS. WE HAVE NOT YET HAD ANY SUBSTANTIVE
16
SUBMISSIONS AND WE LOOK FORWARD TO SEEING THESE AS SOON AS
POSSIBLE SO THAT WE HAVE TIME TO CONSIDER THEM IN DEPTH.
IN FACT, I WANT TO MAKE IT CLEAR TO PREMIERS THAT WE
ARE REGARDING THIS REVIEW, AT THE AUSTRALIAN GOVERNMENT END,
AS A MATTER OF IMPORTANCE; THAT WE WANT TO CANVASS ALL OPTIONS
OPEN TO US, AND THAT WE ARE AIMING TO CONDUCT THE REVIEW IN A
FULLY CO-OPERATIVE FASHION WITH THE STATES AND IN THE HOPE
THAT THE REVIEW WILL RESULT IN AN IMIROVEMENT IN RELATIONSHIPS
FROM ALL POINTS OF VIEW.
YOU WILL PROBABLY HAVE READ OF THE RECENT ESTABLISHMENT
OF A SMALL MINISTERIAL COMMITTEE TO WORK ON THIS. I EXPECT
THAT COMMITTEE WILL BE MEETING FREQUENTLY OVER THE NEXT FEW
WEEKS. WHAT WE WOULD THEN LIKE TO SEE HAPPEN IS A PROCESS OF
FULL AND FRUNK DISCUSSIONS BETWEEN OUR. TREASURY
OFFICIALS. SPEAKING FOR THE AUSTRALIAN GOVERNMENT, I CAN SAY
THAT WE WOULD WANT ALL THE OPTIONS TO BE DISCUSSED BETWEEN THE
OFFICIALS WITHOUT COMMITMENT, AND WE WOULD AUTHORISE OU] I OFFICIALS
TO ENGAGE IN SUCH DISCUSSIONS AGAINST THE BACKGROUND OF GUIDANCE
WHICH WE WOULD BE GIVING THEM. OUR AIM WOULD BE THAT OUR
OFFICIALS BEGIN SUCH DISCUSSIONS EARLY IN APRIL. IF THE STATES
ARE PREPARED TO CO-OPERATE IN THIS NEW APPROACH, I WOULD HOPE
THE RESULT WOULD BE THAT WHEN WE MEET TOGETHER TO REVIEW THE
GENERAL REVENUE ASSISTANCE ARRANGEMENTS LATER IN THE FINANCIAL
YEAR WE WILL DO SO ON THE BASIS OF MUCH GREATER KNOWLEDGE, ON
BOTH SIDES, OF THE OPTIONS AVAILABLE AND OF ATTITUDES TO THOSE
OPTIONS. OUR DISCUSSIONS WOULD THEREFORE BE ( AS THEY OUGHT TO
BE FOR SUCH AN IMPORTANT MATTER) ON A MUCH MORE PREPARED AND
RESEIRCII BASIS I'JAN HAS (.; ENE. IZALLY bN,, N TEI, CASE IN Ti.' ., ASI.,
YOU MAY IAVE NOTICED ALSO THAT IN ANNOUNCING TlE
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ESTABIMICMhXT OF THE MIN ISTLI.: lAL. CO:> IJTTEE I MADE SPECIAL
REFERENCE TO OUR POLICI ES TOWARDS PECI ONS, LOCAL AUT1tCE ITIFS
AND CONNIT': ITY PAjITICIPATION I WOUlD EXPECT THAT AS A RiKULT
OF THE WC! RK OF THIS COMMIP" TTEEf: THERR WOULD BE DISCUSSI ONS WiTH
THE STATES AT THE OFFICIAL LEVEL.
THE GENERAL MATTER? OF FINANCIAL ARRANGEMENTS lETWEEN
THE AUSTNALIAN GOVERNMENI! AIND STATE GOVERNM. ENTS WILL PE
DISCUSSYD WITHIN TPh E CONTEXT OF THlE REVIEW 0OF GENERAL REVEN: UE
ASSISTANCE. TIHE PURPOSE GF TODAY'S v;] EETING IS MORE SPECIFIC.
AS YOU WILL ALL BE AWARE, THE GOVERNMELNT HAS TAKEN A NUMB3ER
OF SPECIA\ L. MEASURES TO RJSTO. E FULL iPLOYMENT. FOR ENAMPLE,
THE GOVI: ENMENT MADE? A SERIES OF DECISTONS TO PREVENT
fETRENCHN11\ 11 : NTS IN TilE M1OTOR INDUSTRYV. SIMILARLY, TODAY WE ARE
SEEKING TO ENSURIE THAT STATE GOVERRN: NTS AND THEIR
INsTRUMEN: TALIT IES ARE ABLE TO MAKE TIII R CONTRi BUTION T: 0
THE RESTORATION OP FULL EMPLOY1MENT BY RE-ENGAGEMENT, BY TrlE
PREVENTION OF FURTHER RETRENCHMENT AND TO SOME EXTENT, BY
THE CREATION OF A) DITIONAL EMPLOYMENT OPPORTUNITIES. I
TRUST TIIEREFORE THAT BOTH DURING AND AFTER THE MEETING,
THE SPIRIT OP OUR DISCUSSICNS AND STATEnENTS ' V. ILL REFLECi'
A GREAT3, ER CO-OPERATIVE SPIT1' 1' THAW EAS BEEN TUE OF MA\ Y
OTHER PRE. MIJERS' CON. FElENCES.
OUR OFFER OF FINANCIAL ASS] KEANCE IS, I ASSU; E YOU,
CAREFULLY AND OBlJECTIVELY TA I LORE]) TAK1ING FULL ACCOUNT OF1-'
YOUR SUBMI: SSIONS ANI) GIVING DUE WEIGHflT TO TI TOTAL ECCNGMIC
AND SOCIAL CU( NTEXT. IT : S CFFERH) IN A SPIRiT OF
CO-OPERATION AND) UNJERSTA: ING. I UOPE YOU WILL READILY
ACCEPT ALONG ' IT rTE SPECIFI C PZOPCSAL I HAVE Yui
TO YOU.
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IF, AS I TRUST, W} E CAN REACH1 AGREEIMNT QUICKLY AT
THIS STAGE, I PROPOSE THAT WE ADJOURN TiHE PREMIERS'
CONFERENCE Sc THAT A BRIEF FORMAL MEE9TING OF THE'-LOAN
COUNCIL MA. Y BE COI'% WENED TO DEAL WITH OUR DECISIONS HA~ rING
LOAN COUNCIL IMPLICATIONS.