1i) A US T l A(
1PRIME MINISTER
FOR PRESS 17 May 1976
Lue 4i11i2
There are some important matters that I want to discuss
with you tonight.
I think we all know that when we came of office late last
year, there were somte major problems in front of Australiaproblems
of rising costs, rising prices and a very great
level of inflation running much higher than that in our
major trading partners. This had led to a high and
unacceptable level of unemployment. Much of this had been
caused by Government spending that was much too great and
put real pressure, unreasonable pressure, on the economy.
My-Government was, and is, pledged to overcome these
problems. After the election last year, we immediately
began a review of Government activity. As a result of
that we were able to achieve savings in the last part of
this financial year that would run at an annual rate of
$ 1,000 million. And one of the things we have got to
understand is that when politicians promise things, they
are not promising anything of their own because they have
nothing of their own to give. They are promising something
of yours and the more politicians promise, the less there is
for you to meet your own needs or your family's needs,
and the less there is for industry, for investment and to create
the jobs that are needed to improve the real wealth of Australia
and to provide the opportunities that are wanted right
around the country.
W,, e need to understand that there cannot be a real increase in
ybur income, your standard of living, in Australia's standard
of living, unless there is a real increase in production
throughout Australia. In recent times Australia's total
production has in fact been falling.
Over thepast year or two the view had begun to develop that
we could have it all without really having to pay for it.
Now people are coming to understand that that is not so;
that there is a cost and the cost has been in terms of Inflation
that has often hit the weaker sections of the community much
harder than others. It has hit those who are unable to defend
themselves. It has resulted in unemployment. This has hit the
unskilled and migrants who have recently come to our shore, more
than other sections of the Australian community. / 2
There has been a great cost a cost in terms of human
hardship and thiS now is understood.
Despite the savings that we were able to achieve running at
the rate of $ 1,000 million a year, when oe looked at the
forward estimates for next financial year, we found there was
another prospective deficit approaching $ 5,000 million. That
is nearly $ 1,000 for every taxpayer. This was not basically
as a result of any programmes of ours but as a result of the
continuation of programmes of the previous administration.
Quite plainly, it was an unacceptable situation, so as a result,
with the Treasurer, I cormmissioned an exaaugtive examination
of. allprogrammes of the Government. This has involved
senior public servants, senior Ministers, the Cabinet and
the full Ministry, over recent days and weeks. As a result
of all this work we have been able to make decisions that
will involve much more substantial savings in the next
financial year than anything that was achieved in the last
six months of this financial year.
Many of the decisions that we have had to make have been hard
ones. They have been difficult ones. Programimes will be
reduced. That is not always pleasant because there is often
an intrinsic worth in a particular programme. But the plain
fact is that the programmes in which the Commonwealth Government
had been involved were beyond the capacity of Australia's
taxpayers to afford at the present time. We have to learn to
Live within our means. We know we have ' got to do this as
individuals. We have to learn to do it as a nation.
This does not mean-to say that we have not been able to protect
the weak and the poorer scctions of the community. It-does not mean
that we are not able to protect pensions because we have and
we will. In the measures we are undertaking special concern
is being shown to disadvantaged in the Australian community
and in other important areas where opportunity needs to be
provided by Australians we will be able to uLanage some real
growth and expenditures. Education is such an area.
Another important element of the decisions we have taken in
recent times concerns the nature of programmes and benefits
and the way they ought to be financed.
Medibank is such a programme. There has been a Medibank Review
Committee looking at every aspect of this scheme. Now it is
not a question of whether Medibank will be retained or not
because it certainly will we are committed to that. The
question before us is how should Medibank be paid foi-?
High quality health care for all Australians is plainly very
expensive. It ' is our belief that it shouldI be paid for to
a significant degree separately, and in a way that can be seen.
This is important because of its great expense and because it
is a universal scheme that covers everyone. But in paying
for Medibank we will make sure that the poorest people in the
community do not have to make any additional payment. Those
further up the income scale will still have very heavily
subsidised cover under Medibank. Those who are better off still
will be paying much more nearly the full cost of' what Medibank
provides. .13
3.
We. are also seeking to introduce an element of choice for
as many people as possible and the details of this will be
announced on Thursday by the Treasurer and by the Minister
concerned. I want to emphasise very plainly that the
essential elements of Medibank are being retained. The
cover is universal and no means test is involved.
As. a result of the changes we will be announcing, as a result
of the very substantial savings in expenditures, we are
able to introduce other important reforms. Wie are able to
do this in a way which is completely compatible with a
responsible budget in* August because that has been quite
constantly in our minds.
The first of the reforms I would like to mention is tax
indexation. We are involved in this for two reasons. Through
the process of inflation, people have been pushed into higher
and higher tax paying brackets. This has generated further pressure
for more wages. So it has been a merry go round. It has
been part of the inflationary process, the way the tax system
has interacted with wages over recent times. With tax indexation
this will cease, It will give us an opportunity to relieve
the pressure on wages. Secondly, tax indexation will keep
Governments honest, because it means that if they want more
of your income if we want more of your income we will.
. have to legislate quite specifically for it. Under those
circumstances we will have to argue the case and say what programmes
we'want to finance, and you will be able to make a judgement
between that and the way you would have used the money had it
been left in your hands. So there are two strong and powerful
reasons for our decisions relating to tax indexation. I
believ6 that these particular matters will be very much welcomed
by the total Australian community. I would also like to
add that the decisions that will be announced by the Treasurer
on Thursday relating to tax indexation will be much more
substantial I believe, than any observers had in fact predicted.
The second major reform concerns a revised system of family
allowances and support for families.
There are about 300,000 families in the Australian community which
pay little-9, r no tax. Over 800,000 children are involved with these
families. They are amongst the poor and the very poor in the
Ai~ stralian community. Australia does not do enough for
families in these categoires at the present time. Therefore
we are going to revise the means of support for families
and we are going to make substantial changes in this area.
I would like to emphasise that the changes we will be making
willnot involve any means test. It will involve direct help
to the families concerned.
The approaches we are adopting to tax indexation and to revise
the system of family allowances will make it possible for us
to achieve a much better approach to wages a vital and
vexed question that affects us all. / 4
We now all understand that if wages go up too much, that
does add to inflation, and leads to unemployment.
Surely this is a hard and harsh lesson that we have
learnt over the last two or three years.
Indexation and family allowances taken together, with other
policies of the Government give us as a nation, an unparalleled
opportunity to overcome inflation, to ease inflationary
pressures and to ease the extravagant demands for more and
more wages. I beleive it achieves this because these two
proposals protect the real incomes of people and at the same
time do much to help the poor in the Australian community
As a result of these two policy measures I have asked
the Minister for Employment and Industrial Relations, Mr
Street, to hold discussions with the Australian Council of
Trade Unions and leading employer organisations. The purpose
of those-discussions will be to see if the Australian Council
of Trade Unions wouldi be prepared in the light of our policy
announcements to modify its attitude towards wages policy.
But whatever the outcome of that, we will be pressing forward
because we believe these changes give Australia the chance to break
inflation. They certainly give us an opportunity to support
the Aribtration Commission in the high responsibilities placed
upon it.
We also-believe that the decisions that will be outlined in
detail this week will give great confidence to all Australians.
Coifidence to consumers they will be able to plan ahead, plan
their future and know that Governments won't make irrational,
unreasoned decisions that will upset their own individuals plans.
Confidence amongst investors and I-firmly beleive, the
Governm~ ent believes that those who make investment decisions
now, will be the ones to reap the reward that will come from
a revitalised and expanding Australia. This is certainly
necessary to create the jobs and opportunities that
Australians want.
The measures that are being announced and which I have outlined
make it plain that the Government acts for all Australians
no matter where they live, who they are and what they do.
My Government is a Government for all Australia.
The Government accepts the great responsibility which it must bear
in overcoming the problems that now confront us as a nation.
But in addition, I want to say there is a responsibility on all
of us for what happens to Australia. There is a responsibility
on employers to exercise restraint. There is a responsibility
on employees to exercise restraint. There is a responsibility
on both to act with good will towards each other. The Government
as I have indicated, acts for all Australians and the measures
that are being introduced demonstrate that. Now let each person,
each group, organisation, company and union resolve to work
together for each other and for Australia.
Let us all ; now resolve to make Australia an example of what
a free people can achieve.