PM Transcripts

Transcripts from the Prime Ministers of Australia

Transcript 5588


Photo of Fraser, Malcolm

Fraser, Malcolm

Period of Service: 11/11/1975 to 11/03/1983

More information about Fraser, Malcolm on The National Archive website.

Release Date: 17/05/1981

Release Type: Media Release

Transcript ID: 5588

A fortnight ago the Commonwealth met with State Premiers in
Canberra for the first Premiers' Conference and Loan. Council
Meeting in 1981.
Tonight I would like to step aside from the predictable bickering
that surrounds such conferences and talk to you about the real
issues involved. They are fundamental issues about the role
of government in a free society about cutting back on bloated
bureaucracy; about streamlining and modernising government and
making it more efficient for the eighties and beyond; about
reducing the burden of taxation, and about whether you are free
to spend your earnings as you choose, or only as government
Not so many years ago, governments were under the impression that
they would be popular if they spent money freely; that votes
could be bought. It was that philosophy which raised government
spending-from-3-1cents--in--every-dollar--produced-in Australia
in 1972/ 73 to 37 cents only two years later in 1974/ 75.
It is a matter of history that the sharp increase in government:
spending was not paid f or at that time., But we have paid heavil~ y
since-through inflation and unemployment triggered by the big
budget deficits of those days.
We have been obliged to take tough action to bring the deficit
under control.-The Government has had to borrow massive amounts
to pay for these deficits and these borrowings increasingly
run the risk of depriving private enterprise of the funds it
needs to increase job opportunities. We have to hold back
government spending--. so-that-. private enterprise. can-continue
to grow and take advantage of the magnificent opportunities.
Australia now affords..
Fortunately, there is now a change blowing through the AustraliLan
community. People are realising that governments which spend
money willy-nilly are using resources that wo ' uld otherwise be
available to familil-s and to businesses to spend in the ways
they themselves want. They are realising that governments that
want to spend more money, first have to take it from the people
of Australia in taxes, or borrow it in a way which holds back
job-creating developments.
On every side we are being told " there is too much government,
too much regulation", " taxes are too high", " give us tax relief".
A responsible government cannot reduce taxes unless it first
cuts its spending. / 2

That was one of the reasons for the recent Review of Commonwealth
Functions which identified ways of eventually saving $ 560 million
a year in Commonwealth outlays and pruning 16,000. or so public service
At the Premiers' Conference we carried the process a stage further
by imposing restraints on the tax sharing funds paid by the
Commonwealth to the States. It is not generally realised that
State and Local governments spend just over half of all the
money spent by governments in Australia. But at the same time,
they raise less than one fifth of all the taxes. The Commonwealth
raises the rest. The States keep up their spending only with
the help of massive payments from the Commonwealth. In fact,
about half the funds the States spend are raised by the Commonw * ealth.
To put it simply, the Commonwealth collects the taxes and the
States spend them. This means that if there are to be tax cuts
all levels of government, State as well as Commonwealth, have
to rein in their spending. The question now is whether the
States will take the lead from the Commonwealth and cut
their spending. I hope they will.
Make no mistake, the States have done very well out of the
Commonwealth in the past.. Under the existing agreement, the
States' general revenue funds the monies the States can spend
as they please rose at an average rate of 5.57% per year
( even after inflation is taken into account) in the four
years to 1979/ 80. Total Commonwealth budget spending grew by
under per annum in real terms over the same period.
Wihthsagreement about to come to an end;, we told the States
in no uncertain terms that it was much too generous. The
Commonwealth simply could not afford to go on treating the
States better than it is treating itself. What we are doing
now is asking them to bear a small decline, in real terms, in
their tax sharing funds; they will still increase by 9% in money
terms. Thereafter they will receive a share of total Commonwealth
tax revenues.
Under this new arrangement, the States will fare no better and no
worse than the Commonwealth itself. They will be insulated
from changes in the relative importance of the different sorts
of tax. If past experience is any guide, their revenue will be
more stable than if they were linked only to personal incometax
receipts where is the injustice in-that?
It almost seemed as if the Commonwealth went into the Premiers'
Conference as the sole representative of the Australian taxpayer.
In our view the taxpayer is already carrying too heavy a burden
and the time has come to protect the taxpayer against the
ever-growing demands of government. We succeeded in our aim
at the Premiers' Conference.*
We have put the brakes on the uncontrolled public spending
spree. Without that, there would be no hope of genuine tax
relief in the forseeable future. o000000000

Transcript 5588