J ASRAIJ I
FOR PRESS / J
F76/ 100
MAY 27, 1976
ECONOMIC DEBATE
A week ago, the Treasurer announced a number of major measures
designed to take. Australia a further substantial step towards
prosperity and to help in securing that prosperity for all
Australians. The strategy expressed through these measures has been stated
by the Coalition. Parties on many occasions: in Opposition,
during the election campaign, and in Government.
Our constantly reiterated strategy has been: to bring Government
spending under control, to free resources to the private sector
and to individuals, to pursue a responsible monetary policy with
clearly announced goals, and to generate a climate of national
responsibility in which wage and salary restraint will be possible
and in which both business and unions will act with a principal
regard for the national interest.
The de ' bate over thI-e last week shows that the Labor Party has
no coherent alteinative to offer.
The debate has shown that only the Opposition is still unable
to face the realities of responsible Government.
When the Liberal and Country Parties were overwhelmingly
endorsed by the Australian people last December, we faced aset
of economic circumstances which should never have occurred
in Australia.
They were circumstances in which the opportunities of hundreds
of thousands of Au~ stralians had been curtailed and in which the
weakest sections of the community had suffered most of all.
The fundamental reason why we faced those problems, why so many
Australians were damaged was the approach to policy making
of the previous Government.
For three years the former Government took and encouraged
the attitude that the old restraints on Government spending
the limitations on the resources available no longer applied. I
PRINAE MINISTER
-2-
Difficult choices no longer had to be made between alternatives
which were all desirable in some decgree the attitude was
that if something was desirable, it was fair enough to print
money to pay for it.
The final report of the Social Welfare Commission noted this
very attitude.
" There was an expectation that expert commissions could put
forward proposals for expenditure which would be automatically
adopted." Exactly the same attitude of mind was exhibited by the Leader
of the opposition in this debate on Tuesday.
Again he demonstrated a total incapacity to understand the
basic fact that responsible Governments must set priorities,
must make choices. 0
Now he regards all the expenditures of t-he previous administration
as essential this is evidence not of real concern but of
characteristic unwillingness to face reality.
The Leader of the Opposition went so far as to describe our
package as an attack on the living standards of Australiansthis
from the man whose Government achieved the first real
decline in Australia's gross domestic product for decades.
To the previous administration, indivdual spending was not
e~ sentia. Government spending was.
It never seemed to occur to the members of that disastrous
administration that other Australians did have prioritiesthat
individuals also had needs and that they were entitled
to some certainty in the proportion of their earnings they could
retain to meet these needs.
The Shadow Treasurer showed precisely the sam~ e frame of mind.
I need refer only briefly to one part of his speech which
demonstrates this.
In discussing a package of measures which might have been
acceptable to the Labor Party, he stated:
" caution with the money supply, personal tax indexation, and
increased child endowment might well be part of that package,
brut so too would be the continuation and expansion of the
effective expenditure programmes begun by the Labor Government."
In other words he now accepts the historic reforms of-the
Government's package, but refuses to accept the expenditure
restraint which made them possible. In fact, he wishes
simultaneously to expand Labor's programmes.
The Labor Party is apparently prepared to contemplate a
deficit of $ 6,000, or even $ 7,000 million, required to
finance an expansion of Labor's programmes plus the
introduction of full personal income tax indexation.
This is the programme the Shadow Treasurer imaginatively
describes as spending our way " gently but firmly" out of
stagflation.
The Opposition has failed to understand one cardinal fact.
W~ hen there is high inflation and high interest rates, the
Gcver--ent cannot spend the nation out of unemployment.
A strategy based on greater Government spending is relevant
to conditions of high unemployment, low inflation,. and low
interest rates.
These are the circumstances for which the Keynesian pump
priming approach was devised and in which it can succeed.
They are not the circumstances which face us now.
To apply this approach to a situation of high inflation and
high interest rates, is a recipe for disaster.
Labor tried that and it failed.
Their spokesmen are still advocating that approach.
They have learnt r'. ctnlng.
To make possible the introduction of full personal tax
indexation and lay the ground for a responsible budget, very
ajor reductions on f'orward estimates have been necassary.
ministers have outlined detailed savings in excess of $ 1500
million in their own statements.
Additional budget savings will arise from the Administrative
Review Committee, from the ongoing attack on extravagance and
duplication and from other more detailed savings from
Departments. med-bank savings on the expenditure side will further relieve
the budget.
In all, savings of $ 2,600 million have been achieved as a
result of a new ranking of Government priorities in expenditure.
This exercise has been one of the most wide-ranging and
comprehensive of its kind performed by any Government.
imposing restraints on Government spending has inevitably
meant that many desirable programmes can only move ahead at
a slower pace than we might have hoped.
Unfortunately, there has been no alternative.
In making choices we have been concerned to protect areassuch
as welfare payments where * people are affected as
individuals or areas especially important to opportunity
such as education.
Our Medibank reforms show our concern that the poorest people
in our community should have access to high quality medical
care.
The Medibank Scheme requires no payment at all from those on
lowest incorges. It places the burden of medical costs on
the shoulders of those who can best afford to meet them..
The Government has acted to restrain Government spending
because only in this way can resources be freed to individuals
and to companies.
The package of measures brought down by the Government will
give certainty to People in several ways.
The expenditure restraints mean that for the first time in
several years, both individuals-and business can have confidence
that public sector spending is at last under control.
Full personal tax indexation at last provides an assurance to
all wage, salary and income earners that there will be no increase
in the tax burden without deliberate and public decision.
The family allowances scheme shows the Government's determination
to work in the interest of all Australians.
It shows above all, our concern for the disadvantaged in the
Austra lian community.'
These are solid foundations for confidence.
A guarantee that wages will be protected from unlegislated
increases in taxation has been, of course, a major concern
of the trade union movement.
The trade union movement has taken a consistent view that the
certainty provided by tax indexation would be a major falztor
in wage restraint.
The protection afforded by the family allowances to w,. age earners
near the minimum income with large families, has also been a longstanding
concern of the tr , de union movement.
A responsible control over Government spending can only
be one element in a national effort to restore prosperity.
There is a growing awareness that in recent years excessive
increases in wages and salaries have imposed too great a cost
on many businesses.
The result has been the elimination of many jobs and continuing
price inflation.
6 5-
Wage restraint is necessary so that the private sector can
become profitable once more, in the interests of job
opportunities and price stabilitit.
Other ise there will continue to be high unemployment, there
will continue to be price inflation.
Bringing inflation under control is not just a job for the
Government. Restoring -full employment is a responsibility which falls as
much on the trade unions and businesses, as i-L does on the
Go ve rnme nt.
The packa ge of measures announced by the Government last week,
provides an unparalleled basis for national cooperation.
The great majority of Austral ians are sick and tired of inflation
and unemployment.
People want the merry-go-round to stop.
The approach of the previous Government rei terated in this
House this ieek has not worked. It has instead been a
principal cause of' the problems we now face.
The Government's strategy is working. The present measures
will help to sustain and support the economic recovery which
is now occurring.
With goodwill on all sides they will provide a solid basis
for national cooneration. 000000000000