F76/ 19
EMBARGOED AGAINST
DELIVERY
-A T % I(
FOR PRESS4 February 1976
ADDRESSTO . STATE PREMIERS
This meeting comes at a very critical time for Australia.
It is a time when those of us who head the governments of
Australia have a serious responsibility to consider the nation's
problems and to give a lead in their solution. We are currently
fating the kind of economic crisis which many of us believed
could not occur in Australia.
It is a crisis whose symptoms are the worst period of prolonged
inflation in our history, the highest unemployment for
years and an apallingly high Federal deficit. It is
a crisis which will require the determination of us
and great good will to solve.
Ou." national priorities must be to beat inflation and reduce
unemployment. A pre-requisite for reducing unemployment is to
bring inflation under control.
It is appropriate that the governments of Australi-a should be
meeting at this time.
The role of government of all our governments will be vital
if Australia is to return to prosperity in a reasonable time.
One of the significant sources of our current problems has
been excessive growth in government spending over the last few
years. In a very short time there has been a massive shift
of resources awa-from individuals and companies into the
hands of government.
For individuals, this has been felt in an increasingly
heavy burden of taxation. For companies, this has been
felt in-an erosion of profits and hence in their capacity
to create job opportunities.
The rapid expansion of government spending has helped to
create quite unrealistic expectations about the availability
of resources for government funded projects. There has been
increasing neglect of the basic truth that choices have to be made.
Choices have to be inade between expenditure by individuals,
investment expenditure, and government expenditure. If expenditure
in one area is pushed too hard the others bre ak-dom.
Excessive government expenditure has led to inflation. If we
doni't recognise that choices have to be made, we believe we
can have the world and not pay a price for it.
There are a limitless nuiberof worthy projects government
might support at any time. We cannot support4 them all. Too
many politicans have acted as if choices do not have to be
made as if we can have everything we want at the same time.
That is deceptive and cruel. It leads inevitably to disappointmen
a: d disillusion.
It occurs because of an unwillingness to face the truth that
responsible government frequently involves hard choices,
d iff i c ulIt dy:
I am sure that all those here today have a very clear
appreciation of the difficult choices that must be made.
Policies to control inflation must have as a central objective,
containing government spending and the resul ting huge deficits. ./ 3
Only if the runaway growth in government spending is
halted will the resources be available to expand lasting
ermrlcyment opportuni es in the private sector once
more. Only if there is continued moderation in the rate of
inflation will there be the confidence in the private sector
to expand job opportunities.
In the view of the Federal Governmentv which has the principal
responsibility for management of the economy, we have reached
a critical time of decision. Either we make a serious
determination to expand job opportunities by controlling
inflation or we do not. If we do not we will be failing
in our responsibilities.
Since coming to office we have taken a number of measures
to reduce government spending and to increase the chances
that recovery occurs without adding to inflation.
We have introduced a major set of monetary measures to control
excessive liquidity and further encourage investment, and announce
a series of reductions in government spending so far
totalling $ 360 million for the remainder of this financial
year. The review of spending is continuing.
A similar restraint on the part of all levels of government
will be a major element in getting Australia moving again.
If one makes allowance for those parts of Commonwealth spending
which represent transfers to the States, the total spending
oE the States and their authorities is about -the same as
or even slightly greater than -that of tn-e Federal Gove rment.
In terms of final expenditures on goods and services the States
in fact spend very much more than the Federal Government.
It'is plain, therefore, that our joint responsibility to
restrain government spending must have major implications
for the States as well as for the Federal Government. As
governments we all have an important role to play in the fight / 4
against inflation.
Clearly, expenditure restraint in our own Budget will affect
the States. I am sure you will understand , that it will not
be possible to transfer additional funds to the States
this year, beyond those which have already been committed.
There is simply no more to spend, given that we are confronting
the largest FederAl deficit in Australia's history. Further,
with-the same objectives in view, we cannot support any
increases in the borrowing programmes of the States or their
authorities.
At the same time, it is the very strong belief of the Federal
Government that the States should have greater flexibility
in ordering their own priorities. The excessive centralisation
of power in the Federal Government has led to unnecessary duplicatio.
in administration.
Excessiv,. e centralisation has made it more difficult for the States
to respond to local needs as they see fit. The attempt of the
Federal Government to direct in detail State and local programmes
is part of the same attitude of mind which has led to the attempt
by Government to control more and more of the nation's resources.
Both reflect the view that all wisdom resides in a few at the
Centre. We are now suffering the consequences of this attitude.
' end not merely to encourage individual and company
activity. our aim is to strengthen the independence and
flexibility of State and local Governments.
We will1 be -xrumning the p~ ossibility of absorbing specific
purpose funds into general purpose funds, and of reducing
the degree of Commonwealth supervision of detail in specific
purpose grants.
The States will have the ability to provide the truly essential
community services and facilities for which they and their
. authorities are responsible. In the longer term our policy
on Federal-State relations amounts to a whole new philosophy
of the relationships between the different spheres of government.
Each sphere of government should make decisions on matters
appropriate to it. Matters of proper concern to more than
one sphere should be decided through a process of genuine
consultation and cooperation. There are many matters where the
appropriate information, the readiest access to government
by individuals and groups affected, the greatest opportunities
for administrative efficiency and effectiveness, are in the local
of State spheres.
In these matters local and State Governments must have the
necessary capacity to act as they believe best. Federalism
in Australia must be made to work. It is an essential feature
of good and responsible government. The core of our approach is
the principle of tax-sharing.
A statement is being circulated setting out in brief terms
the essential elements of the scheme. We would like to receive
Premiers' reactions to the basic elements of the scheme, as well
as suggestions on particular points and procedures which might
be followed to pursue the matter further.
I hope that at the end of this conference we will be in agreement
on what the next steps should be. We want to act in this
area as quickly as practicabler consistent with a thorough
examiniation of all the complex issues involved. Our
proposals, of course, include specific arrangements for funding
loc i government on a guaranteed and continuing basis.
We are determined to begin implementing a new scheme for local
government assistance in 1976.77.
ThE rne. ssicy of inprovi: ig relations between the levels of
Government will be further met by the establishment of the
Council for Inter-governmental Relations.
I confirm our comxnittment to the establishment of this body.
It is high time that government put its house in order.
It is up to us to give the lead in restraint. But government
alone, without the whole hearted support of the people,
will not be able to restore prosperity. Restraints in
government must be matched by restraint in the rest of the
community.
Last week we were confronted with a very difficult decision in
the face of the huge increasq in the C. P. I. in the December
quarter. After considering all the issues we decided, in the
grave economic conditions that exist, we had no responsible
choice other than to argue that the commission should not
carry through into its awards at this stage, the large prices
increases which have occurred. We expected to be criticised
for this decision -and we have been. It was a very difficult
decision. We have concluded that a revival of confidence am~ ong both
consumerF and private enterprise depends principally on bringing
infl. ation under con-trol. Consumer spending will revive when
people are confident that inflation is under control. Pa-csing
on the full price rises of.' the December quarter will only lead to
further uncertainty about the direction of the economy
about out. capacity to control inflation.
The very things stopping businesses from investing are the same things
discouraging people from spending anxiety about the future.
Australians have seen every increase in wages in recent years
erodt.:.. tri. T'. 6 are noi. t deluded into tlhi-king that yet
further turn of the spiral will really make them better off.
The previous government attempted to revive consumer spending
by tax concessions, without success. It is nc use applying
the criteria and judgement of 1930' s Keynesian theory to the
economy of 1976. The problems are not the same. The remedies
cannot be the same. We will do whatever we believe is
necessary to over come inflation.
7.
eñ ive the Australian people recognise the serixousness
of the situation and that they will suprt. c-us.
The'y will know that dif ficult -thcugh the deCision. N! aswe
have acted in what we believe are the best firteraevts of
2i usraiia. The Treasurer will shortly give
~ cc our reading of the ecwony and our response
to :_ nac readirc.. lie wll* Il welcome your, ow, n
1 know discussions at this conferencoT wiji-as
.1e. r k and -to the point. As the structure oi relations
between the levels of government changes in response to tb. h
raforns we propose the iMportance o this forx1rt' q~ ro ) W.
I welccme the opportunity at this critical time to discuss
witAi you t~ he condition of Austral-ia and to hear your: vzews,
Tegovernments of Australia have E-n oppo: t-a2: ic. sf; . o rcG
the whole community.
T ~ rañ Govenment has prirncfnaJ. resporsibJ--CY .: orth
n~ unacaement of the Australian economy. The psrforian, e ot
; 7ask can be influenced by what happens a-t Premiers' con-ferercei.,
Ofteii in tne past we have pulled in opposite directions,
with governments pursuing their particular interests,~ a 2 2
to: ndson their own account.
n? through. policy on Feera1-StL_-_ e : elatiois, to
cl. the natti. rG. o-f these conf: erencer. zG thamt we ran Yrnre
e.. iecA. ively concentrate on advancing the well-being of all
>~,... Neither we, nor you, are the masters of the peoplo
,-ie pre, 41) me to govern. we are their servants.
our political philosophies and this should not be
partisan or party forum. we can recognise that the well-being
of Australia must be our primary concern, not the glory or power
of our respective governments. We must put ourselves in
a position to advance the cause of Australia, whatever our
political party. That is our determination, our objective.
know that allof you will join us in the objective. In this