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26 February 1976
PRIM4E MINISTER-ADDRESS IN RE-PLY
In -the last three years, a serious econoioic crisis has been
needlessly brought on Australia, an economic crisis which has
harmed all Australians and has harmed the weak and poor most
of all.
The crisis was principally caused by a failure on the part of
Goverrnent to plan and act responsibly by an unrealistic attitude
to what Government can effectively achieve.
To restore prosperity there must be a much more realistic
appreciation of what Government can and cannot do.
At the heart of Australia's current problems is a lack of
realism about one simple basic fact the fact that at any one
time Australians' resources are limited.
This fact should be obvious, when we address ourselves to it.
It is obvious, but despite this, it has been persistently
and dangerously ignored.
Because our resources are limited, we are -or ought to beconstantly
faced with choices about how those resources will
be used. / 2
Those choices are often very difficult to make.
It would be more comfortable for us all if we did not
have to face the~ q But if we ignore them, if we pretend
that we do not have to choose, we do so at our peril.
Real improvements which are no'c-at the expense of other
people, other areas, are restricted by the'rate of real economic
growth. The fact that our resources are limited presents hard
choices in many areas. There is an obligation on all of us
to face up to those choices.
The need to choose how our resources will be used, confronts
us all. I want to discuss tonight, three areas where the need
to choose is pressing.
The three areas are government expenditure, wagcs and salaries,
and social security spending.
First, government expenditure.
Because our resources are limited at any one time, we have
to choose which of the many worthwriile things that need to be
dlone we will do now, and which we will leave for the Zfuture.
It is crucial. to understand that these choices are not just
choices between different areas of government expenditure.
They are also even more importantly choices between
government spending on the one hand and spending by individuals
and private enterprises on the other.
The more Government decides to spend on goods and services
the less real value the wage and salary earner can expect
to have in his pay packet. The more politicans decide how
People's earnings are to be spent, the less discretion do people
have over their own income. / 3
A resonsible. Governrent must be prepared t--o take the very
difficult decisons between different kinds of public
expenditure . A government which vatlues the independence
and capacity of Australians to make as they wish the
important decision of their lives, will not pre-empt. too large a
proportion 6f people's incomes for Government programmes.
I[ n the end, of course, there is no escape from responsibility.
The pressure from limited resources is ultimately inescapable,
as... we are now finding to our cost, and as other countries
such as Great Britain, are finding to their cost.
In the last three years, there have been quit-e extraordinary
increases in Government spending. Just because Australians'
wealth is limited, this has required a massive transfer
of resources from individuals and private enterprise to
Govcrnment.
Looking over the last three years, at the many new costly
programmes which have been undertaken, we should remnember
how they have been paid for, and who has paid for them.
Enormous expenditures were made which were quite unrelated
to the Government' s revenue.
The deficit for the last two financial years is of the brdei
of $ 7,000 million. The new Government has inherited a
deficit which the Australian people were told in August would
be $ 2800 million but which was rising out of control t'owards
$ 5000 million by the end of the year. Since the revenue
was inadequate to cover this massive expenditure, it has
been financed out of inflation.
The people who have paid for this expenditure are those whose
real income and savings have been eroded by inflation. The
burden has fallen most heavily on the productive sector of the
economy, on those people who have lost their jobs, and on -the
weaker and poorer sections of the community.
The report of the inquiry into poverty states;. " Inflation
favours the active and the powerful: the position of
poor people deteriorates.'
Many of the previous Government's programmes were introduced
in the guise of helping the disadvantaged. The fact that many of
these programmes have been financed out of intlation makes
a mockery of these pretensions. The report of the poverty
inquiry stated quite plainly that inflation contributed to poverty
in Australia.
" No country with a continuing inflation rate of over 10% has
been able to prevent this causing grave hardship to
important groups of poor people."
On-Tuesday, we heard an impassioned attack from the Leader
of the Opposition on the programme of the. present Government.
So distant is the Member for Werriwa's touch with reality that
he forgot the reality of his years of misrule anid represented it as
a progressive Government full of compassion for the disadvantaged,
a Government which took concrete action to assist those in need.
The real record of his Government is far from this.
The former Labor Government, despite its protestations, in effect
sacrificed its claims for concern for the disadvantaged
to its dream for the centralisation of power.
Let's look at the most blatant fact unemployment. An
unemployment directly consequential on Labor's disregard for the
fact of life; an unemployment which hamned most of all the weak)
the migrants, the poor those sections of the Australian community
which have sometimes looked upon the A. L. P. as their protector.
These people were sacrificed by Labor to unemployment. The
Labor Party refused to face the fact that the more Government spent,
the less there was for private enterprise to use in creating job
opportunities. These social democrats, these so-called protectors,
of the weak and poor, brought the highest unemployment to Australia
since the Great Depression.
The Leader of the Opposition certainly cannot. be criticised
for allowing the facts his Government created, to
weigh too heavily on his mind. In migration the reunion
programme nullified pensions. The Labor Government
abandoned its commitments to increase pensions according
to average weekly earnings. His last Treasurer deferred
the-pension increase by a month. His last Minister for
Social Security conducted an attack on voluntary
welfare agencies. In education, his Government was forced
by its own failure to abandon triennial funding and disrupt
important research programmes.
The Leader of the Opposition might well be thankful that his
dismissal and overwhelming rejection by the Australian
population gave him the time and the frame of mind to embroider
the myth of a social democratic Government brought to an untimely
end. The reality is of an elitist political party which has severed
its bases of support in the interest of expanding the power
of a few men. The reality is a political party which has wilfully
spent Australia into the worst inflation and the highest
unemployment for decades.
Excessive Government spending tended to exacerbate inflation
and infaltion has continued to sap confidence throughout the
community. Expectations of inflation have added a big element
of uncertainty to investment decision uncertainty has
damped investment activity. Both the current level of activity
and the long term potential for economic growth have been curtailed
as a result.
Inflation and the fear of unemployment has also contributed to the
reluctance of consumers to spend as reflected in a sharp.
increase in the rate of savings.
Between 1971-72 and 1974-75 the savings ratio in Australia rose from
9.7 percent to 17 percent. The indications are that
individuals react to high Yates of inflation by
seeking higher cash balances to protect theiñ own positions
and ininimise what they view as the risks to their security.
The very things that encourage people tCo save uncertainty
and fear of inflation are the same things inhibiting business
from investing.
The first task is to bring inflation under control.
Pre-eminently, that means asserting a responsible attitude to
Government spending. This means being prepared to tell people
the truth that at any one time there are limits on what
Government can do without damaging the capacity of other
people to achieve their objectives.
The Government believes th-at since resources are limited the
crucial choice between Government and private spending should
be as far as possible an explicit choice' a choice which is
clearly presented to the Australian people.
For that reason the Government had as a major plank in its
election programmie the introduc-tion of tax indexation. For
that reason the Government will begin the implementation of
tax index~ ation in the next Budget. For that reason the Government
will be aiming to take as Ilarge a first step as will be possible
in the econom~ ic and budgetary circumstances.
The Government regards indexation as a major part of its
programme to control inflation and force Governments to be honest
about the costs of their spending programmes.
We believe that the Australian people will appreciate that tax
indexation ( and its accompanying tax reforms) is a far more
effective way of protecting their earnings than seeking even
higher money wages which are soon eroded by price increases.
The Government believes that responsbility with respect to its
own spending, with respect to the claims it makes on peoples
incomes, is the best way to secure responsibility in wage and
salary demands. / 7.
This leads me to the second area where Australians
as a people have to face the consequences of limited
resources the area of wage and salary demands.
The previous Government pretended to people that they could
have higher and higher real wages and salaries at the same time
as real Government spending was rising rapidly. In doing this, it
was failing utterly in its duties . It was an undertaking
a cruel and deceitful fraud which inevitably led to
disastrous inflation.
It is also being now more widely recognised that those people
who have jobs cannot obtain higher and higher wages without
taking money which could be used to provide jobs for those currently
out of work. Often higher wages and salaries are being paid
at the expense of jobs, at the expense of economic recovery.
Likewise, every unjustified increase in price by a business,
places an added strain on the resources of wage and salary
earners.
The Governments looks to business and trade unions to act
responsibly in the national interest.
In the fight against inflation, we will conduct a continuing
dialogue with key groups in the community. One example
of this is the tripartite conference in Melbourne in January
attended by trade union leaders, employers' representatives
and the Government. Such disucssions will contribute
to better policies and to more successful anti-inflationary
performance.
We have also established the Economic Consultative Group,
which consists of 17 business and union leaders and which m'ut
with senior ministers on 6th February as the-first in a regular
series of exchanges of information and views.
Employers have duties imposed by law to their shareholders.
Other laws, and common morality, give them obligations to their
employers and to the public.
The Government expects employers to demonstrate a commitment
to economic'recovery in the national interest. The Government
expects a like commitment from the trade union movement.
The trade union movement, and particularly the must
be concerned with jobs and productivity. The trade union movement
can no longer be too much concerned with higher money wages at the
expense of other legitimate concerns such as the working environmen.
and jobs. An exclusive concern with money wages is to pursue
momentary interest at the expense of jobs and at the expense of
their worKmates.
Lack of wage restraint will. have immediate consequences the loss
of productive jobs as employers lay off staff. It haF long term co:
in that the essential conditions for real improvement in standards
of living are under-mined by inflation.
Increasingly, the rank and file unionist is realising that higher
money wages which undermine the pre-requisite of economic
prosperity are neither in their interests nor in the interests
of other Australians.
No longer can the trade union movement argue that providing jobs is
the sole responsibility of employers. No longer can the trade
union movement regard itself as responsible only for getting more
money for its members. The power of the trade union movement
must involve a broader responsibility. Unless the union movement
discharges this responsiblity, its support amongst its own members
will be eroded. A concern that there . are adequate jobs is a
basic responsibility of the trade union leadership.
A concern to reduce inflaLion and protect jobs has beeni at the
heart of the decisions and action t-akren by the Government since
it was confirmed in office by the Australian electors. It was
the basis of our submission to the Arbitration Commission in the
National Wage Case.
In the general strategy for economic recovery the Arbitration
Commission has a very significant role to play. The Arbitration
Commission is not one of the anonymous commissions that proliferated
under the Labor Government. It is a long established highly respected
institution, one whose actions and their consequences are
closely watched by all the Australian people.
The Arbitration Commission Act require. s the Commission to take
into account the impact of its decisions on the economy. In the
last case before the Commission the Government took the decision
to oppose the passing on of the full 6.4% C. P. I. increase into
wages on the grounds that it would increase inflation and unemployement
and not provide the consumer and investor confidence essential to
a soundly based economic recovery. The Arbitration Commission in
its wisdom did pass the full 6.4% into wages. Flow soundly based
the decision, was for the well being of the Australian economny, for the
well being of the wage and salary earner will soon be discernible
for all to see.
I's there anyone who has argued that the decision. was positively good
for the economy?
We judged that the position we took was one we had to take as a
responsible Government. We told the Commission what we saw to
be in the interests of the community as a whole. Australians wil.
expect and rightly expect that al. l sections of the community
will cooperate in securing a return to prosperity.
With this cooperation, 1976 should be a year of recovery. This
recovery may very well be gradual, but this is all to the good.
We have done with violent swings in policy. A moderate rate of
growth will ensure balance, a lessening of inflation and the
expectations which perpetuate it.
This is the singl. e most important factor in ensuring that
recovery is a lasting one. our policy not only con siders 1076
but the years beyond that as viell.
This brings me to the third area where Australians as a People
have to face the fact of limited resources.
A genuine return to prosperity will require that assistance to
the disadvantaged and those in need is effectively provided.
The Government's approach to social welfare is based on'the
Government's commitment to the value of each person and each
person' s right to dignity and autonomy. It is also based on
the Government's recognition that there are limited resources
to devote to the general welfare area, arid those resources that
are available must be devoted first of all to helping t-hosb who
are disadvantaged.
The Government endorses the principle spelled out by the report
of Inquiry into Poverty, that " need, and degree of need, should be
the primary test by which help given to a person group or community
should be determined."
Failure to observe this principle must mean the diversion of
resources to people who cannot be said to " need" them, at the
expense of the other people and programmes from which the resources
have beern drawn.
The Report of the Poverty Inquiry itself dtew attention to the
fact that:
" Very large sums are being spent by Governments on the pretext that
they are helping poor people when in fact the great bulk of the
money goes to the middle class and poor people get little."
Such a diversion of resources can be positively damaging to those in
real need while having substantial hidden costs in terms of
opportunities forgone in other areas. It may be possible to
substantially improve assistance to those in need while reducing
the overall burden'of some programmnes.
Our aims go much further than the achie. eent of material
prosperity. We wnt to see Government assume a role in tis sociezvt which is
consistent to the development of persoral fr-adam and individual
initiative. To the development of nerson:-freiom and individual
initiative. To quote his Excellency, the Governor General
we aim to develop a " role for Government. which oilaces more
reliance on the commonsense and reason of t-e Australian people".
We do not believe that the Australian Deonle want a Government
which takes over from them their reszonsfi lity for decisions
concerning the manner in which they live. do not believe
they wish to forfeit their individualisi to an all-pervading
paternalistic Government.
The long term objective of the Gov . rnment is to encourage the
development of an Australia in which peoepe are free and encouraged
to achieve goals in life which they set for themselves.
It would be an Australia in which Govern-'. :. ts recognise that they
cannot presume to live people's lives for hcm. That recognising
the dignity of people means valuing the inependence of people
to take the important decisions of thc. ir ves for themselves.
It would be an Australia where ther_ is a c-ni: ine concern to assist
those in real need, those who are idsL.' antage1 an Australia
where effective action is taken to ) s-is: thE disadvantaged.
It would be an Australia in which piwerful interests recognise
their responsibilities to the indi'i uals t: ivy serve and to the
wider community.
It is our unqualified policy to rcz; tOre Svernment to a role
in Australia consistent with fr4ee.> s true democracy.