PRIME MINISTER
CHECK AGAINST DELIVERY EMBARGOED UNTIL DELIVERY
ADDRESS BY THE PRIME MINISTER
AUSTRALIAN FINANCIAL REVIEW
PCST-BUDGET DINNER !] E1ROUJNC 70 AUGUST 1986
LADIES AND GENTLEMEN
THE AFR DodNER HAS NOW BECOME A SIGNIFICANT ELEMENT OF THE
ANNUA. PojIr-BUDGET ROUND. IT HAS BECOME AN IMPORTANT PART
OF THE PROCESS OF COMMUNICATING THE ESSENTIALS OF THE BUDGET
TO THE VJIEST POSSIBLE AUDIENCEI
HAVE FOUND OVER THE YEARS THAT Tit[: AUi IN MAKING tHJS
SPEECH ' S TO FINP A PRESENfAr ION WlilCll WILL BRING EACH Oil
THE SEPARlATE ; NGREDIENTS OF THE BUDGET STRATEGY TOGETHER IN
A WAY U' 42N: H IS BOTH ELEGANT AND DIGESTIBLE, ESPECIALLY AFTER
SO PLEASA'lT A MEAL AS THE O~ R TRAIIIONALLv ARRANGESPERHAPF,
ET WAS THE THOUGHr OF THAT MFAL OR PERHAPS IT
WAS THE THOUGHT OF MY LOOSE PRITIKIN nIIfr BUT FOR
WHATEVE. REASON I HAVE CHOSEN TO INTRODUCLE MY ADDRESS THIS
YEAR WIITl SOME EXTRACTS FROM NORMAN LINDSAY'S " THE MAGIC
PUDNG
SOME C7 YOU WHO HAVE CHILDREN OR GRAND) CHILDFW; N YOUNG FNOUGH
TO DE RZAD TO MAY WELL HAVE ENCOUNIt AVD THIS PASSAGE
RECENTLY FOR WHICH IAPOLOGISE.
BUT FOR MOST OF US, THINK, TIr WILL. RE A HEftESHFR COURSELET
ME SAY AT ONCE THAT ANALOGIES ARE INVARIABLY IMPERFECTAND
THIS ONE IS NO FXCEPTION. 110T If: YOU WILL BEAR WITH ME
I THINK THAT ONE OR TWO USEFUL POINtS (, AN BE MADE WITHOUT
GREAT DISTORTION-
2.
LET E BEGIN BY REMINDING YOU THAT THE PUDDING IS CALLED
ALBERT ( BECAUSE, WE ARE TOLD, OIT SOOTHES HIM"). HE WAS
PRONE TO BE TESTY-THE QUOTE BEGINS:
A PECULIAR THING ABOUT THE PUDDIN' WAS THAT,
THOUGH THEY HAD ALL HAD A GREAT MANY SLICES OF HIM,
THERE WAS NO SIGN OF THE PLACE WHENCE THE SLICES HAD
SEEN CUT. o
DTHAT'S WHERE THE MAGIC COMES IN', EXPLAINED BILL.
' TUt mORE YOU EAT THE MORE YOU GETS. CUT-AN'-COME-AGAIN
IS AIS NAME, AN' CUT, AN0 COME AGAIN IS HIS NATURE
IN HANYV WAVS I THINK THAT AUSTRALIANS HAVE REGARDED THE
ECONONY AS A BIT LIKE THE " PUDDING".
FOR YCARS WZ HAVE BEEN EATING AWAY LITERALLY WITH
SEEIC. GLV LITTLE EFFECT ON THE ECONOMY. LIKE MAGIC, OUR
INCOMe 91AS KEPT ON GROWING, THOUGH OF COURSE THE RATE OF
I GROWT! h-HAS DEPENDED ON ECONOMIC MANAGEMENT. AND ON THAT
COUNT œ T GIVES ME SOME PREDE THAT OVER THE THREE YEARS OF'
iOUR STZWARDSHIP GROWTH IN THE ECONOMY OVERALL HAS AVERAGED
TWICE " H ANNUAL RATE THAT COULD BE MUSTERED DURING THE 7
YEARS OF OUR PREDECESSORSBUT
AUSTRALIA HAS RECEIVED A RUDE SHOCK. THE MAGIC HAS
GONE. TME WORLD HAS LET US DOWN SHARPLY. TO EXPAND OUR
REAL WEALTH NOW AT THE RATES THAT WE WOULD LIKE WE WILL NEED
TO HEET THE NEW REALITIES OF WORLD TRADE, MOVE INTO NEW
AREAS OF ACTIVITY AND WORK HARDER IN OUR TRADITIONAL
ACTIVITIES. THIS BUDGEr IS ABOUT RESTORING THE CONDITIONS THAT WILL
ALLOW THE " PUDDING" TO GROW RAPIDLY AGAIN NOT BY MAGIC, OR
INITIALLY AS THE GIFr OF BENEVOLENT WORLD MARKETS, BUT
BECAUSE OF OUR OWN HARD WORK.
IT IS, IN EVERY SENSE, A BUDGEI OF HOPE, A BUDGET FOR THE
FUTURE, A BUDGET FOR FUTURE DEVOTEES OF LINDSAY'S PUDDING.
IT IS A BUDGE~ T WHICH HAS MET OR EXCEkVEI) EVERY REASONABLLE
EXPECTATION SET FOR IT FAIR BUI I; IRM CONTROL OVER
EXPENDITURE; AND A SUBSTANTIAL cur IN THE DEFICIT-IT IS
THE BUDGET tlHICH THE OPPOSITION COULD NEVER DELIVERONE
GOOD LUDGET WILL NOT ACHIEVE THE NECESSARY RESULTS ON
ITS OWN-OTHER POLICIES MONETARY POLICY, WAGES POLICY,
INDUSTRY POLICY, ARE ALSO IMPORTANT-So, TOO, IS
SUSTAINED F2SCAL RESPONSIBILITY. EACH OF THESE WILL BE
DEL I VE ( lE 0
AND MAKE flD MISTAKE, VIE WILL SUCCEED. VIE WILL SUCCEED' NOT
ONLV BECAUSE WE ARE A RESPONSIBLE GOVERNMENT PREPARED TO
STAY TH-E COURSE AND TO TAKE THES RIGHT DECISIONS REGARDLESS
OF POLITECiAL RISKS-WE WILL SUCCEED ALSO BECAUSE THIS LABOR
GOVERNMEN2T HAS HAD AUSTRALIA TRAI. NING ON THAT COURSE FOR
OVER 3 Y_-AS NOW.
To SET THE SCENE, LET NE UU~ BACK IN TIME A LITTLE, TO THE
APPARENTL7 1lIAGIC PUDDING" ERA. THE TREND HAS BEEN OVER THE
PAST 20 YEARS FOR AUSTRALIA TO DEVOTE AN INCREASING SHARE OF
GDP TO CCASUMPTION. DOMESTIC SAVING HAS FALLEN FROM AN
AVERAGE OF 17.5 PER CENT OF GDP PCR YEAR IN THE 10 YEARS
ENDED 1973-74 TO JUST 11. L4 PER CENT LAST YEAR. Tmie
DIFFEREN'CE WAS TAKEN UP IN A LARGER SHARE OF GDP BEING
DEVOTED -70 CONSUMPTION I. E. ' TO SUPPORTING HIGHER CURRENT
LIVING STANDARDS.
THE XNVESTMENT SHARE FELL A LITTLE BETWEE-N THESE PERIODS
BV ABOUT 2 PERCENTAGE POINTS. THE REMAINING GAP BETWEEN
DOMESTEC SAVING AND OUR TOTAL FINANCING REQUIREMENT WAS MET
BY BORaCUING AN INCREASING SHARE FROM ABROADIN
1985-36 AUSTRALIA SPENT ABOUT 6 PER CE~ NT MOnE THAN IT
EARNED. THE DIFFERENCE WAS BORROWED OVERSFAS. THIS CAME AT
A TiME WHEN THE FOREIGN CURRENCY VALUE OF OUR FOREIGN DEBT
HAD ALREADY BEEN DOUBLED OVER THE PREVIOUS TWO YEARS. IN
PART U. ECAUSE OF THE SHARP DEPRECIATION OF EARLY 1985.
WE SIMPLV CANNOT GO ON ADDING TO OUR DEBT AS FAST AS WE HAVE
BEEN-UE NEED TO PEG BACK THE GROWTH OF SPENDING,
TEMPORARILY. AND OVER TIME RAISE OUR EARNINGSON~
LY THEN WIL L THE " PUDDING" RESUME GlROWING AT THE " MAGICAL"
RATES WHIICH WE REQUIRE TO FURTHER WIND BACK THE HUGE LEGACY
OF UNEMPLOYMENT LEFT To LABOR BY OUR PREDECESSORS.
THE GREAT IRONY IS THAT LABOR'S POLICIES ARE CLEARLY WORKING
TO CREATE J. UST THE CONDITIONS REQUIR( ED.
THE EVIDENCE IS CLEAR. REAL UNIT LABOUR COSTS HAVE FALLEN 7
PER CENT IN JUST 3 YEARS. UITH THE DOLLAR ALSO LOWER OUR
INTERNAI'iONAL COMPETITIVENESS IS THE BEST IN 20 YEARSPROFXTS
ARE UP, STRIKES ARE DOWN. STARTING FROM 7HE
INFAMOUS $ 9.6 BIJLLION LEGACY OF MR HOWARD, WE PROGRESSIVELY
REDUCED THE DEFICIT IN OUR FIRST THREE RUDETSOUR
RECOR~ D OF DOMESTIC ECONOMIC ACHIEVEMENT 15 WELL
APPRECIATED. L. ESS WELL UNJDERSTOOD IS OUR PERFORMANCE IN.
WORLD T " DE.
EXPORT VOLUMES ARE SHARPLY UP By 7.4~ PER CENT IN 1985-86.
HOPEOVEP OVER THE LAST SIX MONTHS THE VOLUME OF IMPORTS tEAS
DROPPED DRAMATICALLY -AT A RATE OF 10 PER CENT PER ANNUM.
BUT PROGRESS TO DATE IN CUTTING OUR CURRENT ACCOUNT DEFICIT
HAS SEEN SWAMPED BY THE SHARP FALL IN THE WORLD PRICES OF
MANY OF OUR PRIMARY EXPORTING COMMODITIES.
THAT IS A NEW ELEMENT WHICH REQUIRES A NEW RESPONSE-SOM4E
$ 41BILLION WAS ADDED TO THE CURRENT ACCOUNT DEFICIT FOR
THIS REASON IN 1985-86.
THE REDUCTION IN OUR TERMS OF TRADE IS SO LARGE THAT IT IS
NOW COSTING US AROUND $ 6 BILLION A YEAR-WITH LITTLE
PROSPECT OF AN EARLY SHARP REVERSAL OF THESE PRICE FALLS,
POLICY HAS HAD TO INITIATE YET FURTHER AD) JUSTMENTS.
THIS BUDGET HAS DONE SO-
ONE OPTION WOULD HAVE BEEN TO ALLOW NATURE TO TAKE ITS
COURSE BECAUSE THE ECONOMY WILL ADJUST ONE WAY OR ANOTHER.
BUT THAT WOULD HAVE RISKED HIGH iNTEREST RATES, AN UNSTABLE
CURRENCY, GREAT BUSINESS UNCERTAINTY AND MOST LIKELY
PROLONGED RECESSION AND A SUSTAINED PERIOD OF SHARPLY HIGHER
UNEMPLOYMENTo THAT IS NOT THE COURSE WE HAVE CHOSEN WITH THIS BUDGET.
THIS BUDGET AND ITS ASSOCIATED POLICIES Is sEt 1O SMOOTH
THE ADJUSTMENT PATH. IT GUIDES AUSTRALIA THROUGH THE
TRANSITION PERIOD IN A WAY WHICH WILL MAXIMIZE OUR LONG-TERM
GROWTH POTENTIALo
IN OTHER UIORDS THIS BUDGET IS ULTIMATELY AN INVESTMENT IN
JOBS GPOWTII SECURE JOBS, PERMANENT JOBS. IT IS A BUDGET
TO PROVIDE ZONFIDENCE AND CERTAINTY CONFIDENCe AND
CERTAINTY THAT THIS IS A GOVERNMENT WHICH KNOWS WHAT IS
REQUIRED AN3D WILL DELIVER.
CENTRAL TO YHE BUDGET IS FIRM BUT FAIR RESTRAINT ON OUTLAYS.
AT 6.9 PER CENT, THE GROWTH IN NOMINAL OUTLAYS IS LOWER THAN
THE OUTC0* 2E IN ANY YEAR SINCE 1968-69. THE BUDGET PROVIDES
FOR NO GROUTH IN REAL TERMS IN 1986-87, COMPARED TO AN
AVERAGE R'SE OVER THE PAST DECADE OF 3.2 PER CENT.
STARTING FROM THE INHERITANCE BEQUEATHED US BY OUR
PROFLIGATE PREDECESSORS AND REFLECTED IN OUR FIRST BUDGET,
LABOR HAS CONSISTENTLY PRUNED BACK THE GROWTH Of PUBLIC
$ ECTOR OUTLAYS IN EACH SUCCESSIVE BUDGET.
MOREOVER IT IS NOT SIMPLY BUDGET NIGHT BRAVADO. LABOR HAS
AN OUTSTANDING RECORD OF DELIVERING ON BUDGET PROMISESTHE
ABSOLUTE VALUE OF OUR BUDGET OUTLAYS FORECAST ERRORS HAS BEEN
ONLY 0.5 PER CENT OVER OUR FIRST THREE BUDGTS. COMPARE
THAT W8TH THE 2.1 PER CENT NOTCHED UP OVER THE LAST THREE OF
OUR PREDECESSORS.
WHAT CREDIDIILITY HAVE HOWARD'S EMPTY PROMISES TO CONTAIN
BUDGET OUTLAYS WHEN VIEWED AGAINST THIS RECORD?
WHERE ARE HIS ALTERNATIVE SPENDING CUTS? JUST TAKE ONE
TYPICAL EXAM1PLE HIS MEDICARE PROPOSAL WILL LM THE
BUDGET, NOT REDUCE THE DEFICITBRINGINJG
OUTLAYS GROWTH TO A STANDSTILL IN REAL TERMS HAS
NOT BEEN ANJ EASY TrASK UNLIKE ALBERT THIS " PUDDING" SHOWS
THE MARKSWE
HAVE SOUGHT TO APPORTION CUTS FAIRLY, WITH LEAST BURDEN
BORNE BY THOSE LEAST CAPABLE OF SUPPORTING ITGROSS
SAVYINGS TOTALLING WELL OVER $ 3 BILLION HAVE BEEN
ACH9EVED SINCE JANUARY 1985, WITH CUTS IN ALL FUNCTIONAL
AREAS. GROWTH IN THE DEFENCE ALLOCATION AND OVERSEAS AID SPENDING
HAVE EACH~ ZEEN CUT SIGNIFICANTLY.
INEVITABLY SIGNIFICANT CUTS HAVE BEEN REQUIRED IN THE
HEALTHo EDUCATION AND SOCIAL SECUHIIY AREAS-IN THE LATTER
CASE MAXIMUM EMPHASIS HAS BEEN PUT ON TIGHTENING UP
ELIGIBILETY CONDITIONS AND ADMINISTRATION TO DENY BENEFITS
TO THE NON-NEEDY, CHEATS OR THOSE OTHERWISE NOT ENTITLED TO
THEMTHE RESIDUAL LOAD TO BE BORNE TEMPORARILY BY PENSIONERS
COULD NOT BE AVOIDED-IT HAS BEEN DELIBERATELY KEPT VERY
MUCH LIGHTER THAN THAT TO BE BORNE BY WAGE EARNERS, WHO
CLEARLY ARE BETTER PLACEDEVEN
ALLOWING FOR THE REDUCTIONS ACHIEVED, THE SHARE OF
OUTLAYS DEVOTED TO SOCIAL SECURITY AND WELFARE PAYMENTS IS
EXPECTED TO RISE BY 0.4 PERCENTAGE POINTS To 27.8 PER CENT
IN 1985-87. THE SHARES OF OTHER ELEMENTS OF THE SOCIAL WAGE
ARE BROADLY UNCHANGED-
BEFORE I LEAVE THE OUILAYS SIDE OF TilE BUDGET THERE IS ONE
ELEMENT OF THE PUBLIC SECrOR THAT DOES REMIND ME VERY MUCH
OF THE " MAGIC PUDDING". THAT IS PUBLIC SECTOR STAFFING. IF
PREVIOUS EFFORTS ARE ANY GUIDE THE MORE YOU TRY TO CUT ' EM
THE MORE THEY GROWTHE
FLAW IV PREVIOUS EFFORTS HAS BEEN THAT STAFF CONTROLS
HAVE ONLY DEE EFFICACIOUS IN THE SHORT-TERM. THIS
GOVERNMENT IS DEVELOPING A NUMBER OF REFORMS TO STREAMLINE
AND RATIONAL2SE PUBLIC SERVICE PROCEDURES AND STAFFING WHICH
WILL PRODUCE SUSTAINED RESULTS.
AN EARNEST OF THESE INTENTIONS HAS BEEN INCORPORATED IN THE
BUDGET. STAFF NUMBERS ARE TO BE CUT BY 2000 OVER THE COURSE
OF 1986-87-) EPARTMENTS WILL BE REQUIRED TO PRODUCE AN
" EFFICIENCY DIVIDEND" EACH YEAR, SOMEWHAT AKIN TO INCREASED
PRODUCTIVITY IN THE PRIVATE SECTOR. I WILL BE ANNOUNCING
THE GOVERNME'T'S MEASURES TO ASSIST IN ACHIEVING THESE GOALS
LATER IN SEPTEMBERTAX
REFORM RFMAINS CENTRAL TO THIS GOVERNMENT'S AGENDA.
PERSONAL TAX CUTS WILL BE DELIVERED ON I DECEMBER, WITH THE
FINAL TRANCHE ON 1 JULY 1987. THIS LUMMIIMENI WILL HE EMBEDDED IN
LEGISLATION FOR PASSAGE IN THE CURRENT SESSION,
EVEN AFTER ALLOWING FOR THE GREATER CONTRIBUTION TO HEALTH
CARE FUNDIVG WHICH OUR CIRCUMSTANCES NOW REQUIRE FROM THE
MEDICARE LEVY, ORDINARY WAGE EARNERS WILL RECEIVE A TAX CUT
FROM 1 DEC Fl3ER 01-ABOUT $ 6 P. w. THE VALUE OF THE TAX CUTS
BY 1987-38 VILL BE 3 TIMES THE ADDITIONAL REVENUE RAISED IN
THE TAX PACKAGE.
THERE ARE NO NEW DIRECT IMPOSTS ON BUSINESS IN THIS BUDGET.
HOWEVER ONE SIGNIFICANT ANOMOLY HAS BEFN CORRECTED-ABOUT
PER CENT OF COMPANIES, TYPICALLY AMONGST rHE LARGEST, HAVE
HAD A TAX ADVANTAGE NUT AVAILABLE TO OTHER COMPANIES AND
CERTAINLY KOT AVAILABLE TO ORDINARY WAGE EARNERS. THE
ADVANTAGE HAS ARISEN BECAUSE OF THF ACCOUNTING PFRInDS THEY
HAVE ADOPTED.
IN VIEW OF THE GENERAL NEED FOR RESTRAINT AND TO ACHIEVE
GREATER EQUITY BETWEEN TAXPAYERS THESE COMPANIES HAVE NOW
BEEN REGUESTED TO MOVE, PROGRESSIVELY, ONTO THE COMMON TAX
REGIMETHIS 6OVERNMENr HAS ACCEPTED AN UNPRECEDENTED DEGREE OF
FISCAL PLANNING DISCIPLINE, REPRESENTED BY THE FISCAL
TRILOGYø CON4ISTEN7 WITH THOSE COMMITMENTS OUTLAYS HAVE DECLINED AS A
PROPORTlCN OF GDP IN EACH OF THE 1985-86 AND THE 1986-87
BUDGETS.
FURTHER THE BUDGET DEFICIT Ir 1986-87 IS LESS THAN HALF THE
GDP SWAZ OF 1984-85 AND ONE-THIRD OF THE 4.2 PER CENT
POSTED mw 1983-84 ( EVEN AFTER SUBStANIIAL EXPENDIrURE
PRUNING BY THE INCOMING LABOR GOVERNMENT). IT IS HALF. WHAT
WOULD HAVE RESULTED THIS YEAR IF WE HAD NOT ACTED TO CURB
SPENDING AND SUPPLEMENT REVENUE.
AGGREGATE TAXATION REGEIPTS IN 1985-86 WERE SLIGHTLY LESS
THAN THE BUDGET NIGHT ESTIMATE. HAD NOMINAL GDP MET
EXPECTATIONS THE TRILOGY LIMIT WOULD HAVE BEEN SATISFIED NOT
ONLY ON BUDGET NIGHT BUT ALSO AS AN OUTCOME-IN THE EVENT
THE PLANNED LIMIT HAS BEEN EXCEEDED.
IT REMAINS OUR OBJECTIVE TO REDUCE TAX RECEIPTS TO 25 PER
CENT OF GDP, THE " TRILOGY LIMIT". HOWEVER, HAVING EXERCISED
REMARKABLE EXPENDITURE RESTRAINT, IT IS CLEAR THAT THE
GREATER PRIORITY IS TO REDUCE THE BUDGET DEFICIT IN 1986-87.
ACCORDINGLY ADDIfIONAL rAX REVENUE HAS BEEN SOUGHT.
TAX RECEIPTS WILL IEND 10 FALL NATURALLY BY AROUND 1 PER
CENT OF 6DP IN 1987-88. THIS WILL OCCUR BECAUSE THE TAX
CUTS PROPOSED FOR 1 JULY WILL PRUCEtI) ON TIME. HOWEVER THE
DECISION ABOUT THE TAX SHARE OF GDP IN THE 1987-88 BUDGET
WILL BE TAKEN N THE LIGHT OF CIRCUMSTANCES AT THAT TIME.
IWOULD ADD THAT THE ACOLADE FOR THE HIGHEST TAXING
GOVERNMENT Irl AUSTRALIA RESTS PROPERLY WITH MR HOWARD.
A DJUSTIMG FOR CHANGES IN THE M1ETHOD OF FINANCING HEALTH
XFE" iVITURE, TAX RECEIPTS ARE 24.6 PER CENT OF 6DP iw
p987. THA7 tS LESS THAN MR HOWARD'S RECORD OF 24.7 PER
CEt4T IN 1nU8l-82.
IF I PAN RE7JURN TO THlE " MAGI: C PUDDING" FOR A MINUTE YOU MAY
REMEMBER ALUERT'S USUAL ATTIRE. HE TRAVELS WITH HIS BOWL
UPON HIS HEA~ D ITS PRACTICAL, IT PROTECTS HIM FROM ATTACK.
ISEN; SE IN So' 1 : COMENTATORS A DESIRE TO FIND A BOWL TO
CRAWL UNiX'_ R, ' O WAIT FOR THIS PERIOD IN AUSTRALIA' S
DEVELOPME~ NT TO PASS.
THis GOVERNM1ENT DOES NOT SHARE TMAT VIEW. WE K( NOW WHAT IS
NEEDED TO TACKLE AUSTRALIA'S PROnLEMS HEAD ON AND LEAD
AUSTRALIA THn-OUGH THEM. 1
ECOmOMIC GROAITH WILL BE SLOWER IN 1986-87 BECAUSE OF THE
STEPS WHICK HAVE TO0 BE TAKEN. TmE ENGINE OF GRO-47n IN OUR
ECONOMY t1ILL~ PASS PROM POM.: STIC DEMAND TO THE EXTERNAL
SECTOR, AND ESPECIALLY T& Y EFF; CIEN7 IMPORY REPLACEMENT-BUT
GROWTH WILL OCCUR, AT ABOUT THE AVERAGE OF OUR MAJOR TRADING
PARTNERSINOTE THAT SOME COMMENTATORS HAVE EXPRESSED SOME SCEPTICISM
ABOUT TEAT FORECASTLET
ME DWELl.. FOR A SHORT TIME OIN SOPIL o1: r HE* COMPONENTS OF
THAT FORECASTPRIVATE CONSUMPTION IS FORECAST TO GROW BY ONLY 1.. 2 PER CENT
REAL Im 198G-87, THE LOWEST INCREASE~ IN ANY YEAR SINCE
1955-57-IN LARGE. PART THIS REFLECIS I'HL QUITE SLOW RISE IN
REAL HOUSEHOLD DISPOSABLE INCOME WHICH IS EXPECTEDIN
LINE WITH THE MOST RECENT ABS SURVEY, REAL BUSINeSS
INVESTMENT Is EXPECTED TO DECLINF-
OVERALL F AL PRIVATE DEMAND 9S EXPECrLD TO RISE BY ONLY I
PER CENT im 1986-87 HARDLY AN EXCITING PROSPECTTHE
IIAJCR SOURC. E OF GROWTH IN 1986-81 IS EXPECTED TO BE NET
EXPORYS. THIS COMPONENT IS FORECAST TO CONTRIBUTE 1
PERCENTACE POINTS TO GROWTH [ HIS YEAR, AFTER ADDING1
PERCEN'TAGE~ POINTS TO GROWTH LAST YEARIT
IS IMPORTANT TO LOOK AT THE COMPONENTS OF THAT TIRADE
PERFORMANCE-0
IT IS BAS7"), FIRSTLY, ON GROWTH IN kXPORt VOLUMES OF AROUND
2PRCENT IN 1986-87. THIS COMPARES WITH 7.4 PER CENT INi
1985-86. MOST IMPORTANTLY, iT IS IN LINE WITH EXPECTED
GR'lMOi GDP IN OUR MAJOR 9RAIJING PARINLUS OF 2 PER CENTIN
OTHER VLORDS THE FORECAST DOES NT& i kSUME ANY INCREASE INI
OUR ; 4A: U: T SHARE, DESP~ ITE THE MASSIVE IMPROVEMENT IN THE
COMPZTSTIVEiNESS OF OUR EXPORTSONR
THn SIDE THE FORECAST IMPLIES A REAL* FALL op 6~
PER CE' 11T-BUT WHO WOULD SERIOUSLY QUESTIOIS THAT ESIIMATE IN
VIEW NOT GNLY OF THE SLOW GROWtH OF~ DOMESTIC DEMAND BUT ALSO
THE FACT 7:? AT IMPORTS DECLINED AT AN ANNUAL RATE OF 10 PER
CENT J" 3 J", hE FIRST HALF oF 1986? AND WHO WOULD DENY THAT OUR
IMPORT-CO,.-ETING SUPPLIERS WILL BE BETTER GEARED UP IN
1986-87 70 TAKE ADVANTA15E OF THE SUBsTANTIAL INCREASE IN
THEIR CONPZTITIVENESS WHICH OCCURRED OVER THE COURSE OF
1905-85 ( 70 SAY NOTHING OF THE FURTHER IMPROVLMENT SINCE
JUNF)? THE FORECASTS IMPLY THAT EMPLOYMENT WILL RISE SIGNIFICANTLY
OVER THE COURSE OF 1986-87, THOUGH PROBABLY NOT BY ENOUGH TO
PREVENT A R'ISE IN THE AVERAGE UNEMPLOYMENT RATEOBVIOUSLY
2T WOULD HAVE BEEN PREF-ERABLE TO AVOID EVEN A
TEMIPORARYf RISE IN UNEMPLOYMENT-BUI THAT CANNOT
REALISTICALLY BE ACHIEVED IF WE WANT TO SUSIAIN THE MAXIMUM
IRAIE Ut-JV~ UtKiWIH IN 1987-88, 198 09 AND) knvomD-AND OUl
OBJECTIVE IS NO LESS THAN THAT-
WHILE IMPORT AND EXPORT VOLUMES ARE EACH EXPECTED TO MOVE
TOWARDS LOVIERiNG THE CURRENT ACCOUNT DJEFICIT rHE LIKELIHOOD
IS THAT ADVERSE TERMS OF TRADE EFFECTS WiL. L AGAIN
PREDOMINATE IN 1986-87.
AS A RESULTJ LITTLE CHANGE IS EXIPECIEL) IN THE CURRENTACCOUNT
DEFICIT AS A PROPOR'rION OF GDlP, TAKING ; HE YEAR AS A
W4HOLEBUT MOST 9MORTANTLY WlE WILL IEMFRGF FROM 1986-87 IN FAR
BETTER SHAF$: FO REB3UILD) UUR GROW1II PLIWURMANCE INTO 1987-88
AND BEYONDINFLATION Vl BE COMING DOWNTHE
GOVERNMf-N-t WI1LL BE PURSUING WAGE ourCOMES WHICH WILL
PERMIT A FURTHER DECLINE IN REAL UNIT LABOUR COSTS IN
THIS W~ ILL RZELODJRE A 2 PER CENT DISCOUNT AT rHlE NEXT NATIONAL
WIAGE CASEBEYOND THAT WEi WILL SEEK A FURTH[ R UUVINWAHUJ ADJUSTMENT AT TOW
NEXT CASE IF THAT IS REQUIRED.
THAT IS NOT TO IMPLY THAT AUSTRALIA'S PRESENT DIFFICULTIES
ARE ATYRiBUTA3LE TO LASOUR COSTS CLEARLY THEY ARF NOTRATHER
IT9 IS SIMPLY ACKNOWLEDGES THE REALITY THAT UNLESS
LABOUR ZEARS ITS NECESSARY SHARE OF TlE BURDEN OP ONGOING
RESTRAINT V1 WJILL PUT AT RISK 7HE MAGNIFICENT JOBS GROWTH
WHICH HAS ALIEADY OCCURRED OVER THE PAST THREE YEARS AND
WHICH POTEM71ALLY IS STILL BEFORE USI
WOULD ADD THAT THERE HAVE BEEN SOME EXTRAORDINARY
ASSERTIOWS MADE ABOUT WAGES POLICY OVER THlE PAST 24 HOURSONE
SUGGESTION WAS THAT WE SHOULD LEARN FROM THE EXPERIENCE
OF THE UNITED STATES AND. r~ t UNI'rEi KiNGDOM IN OBTAINING
MOUtENT OAGES OUTCOMES-
HAVE OFTEN NOTED THE INAPPROPRIATENESS OF ATTEMPTING TO
TRANSPLANT To AUSTRALIA ARRANGEMENTS WHICH WORK IN FOREIGN
INDUSTRIAL RELATI0NS ENVIRONMENTS.
OUR HISTORV SHOWS CLEARLY THE VALUE TO US OF OUR CENTRALISED
WAGES SYSTEM. THE BREAKDOWN OF THE SYSTEM TOWARDS THE END OF THE
HOWARD ERA ? RODUCED THE HIGHLY UNDISCIPLINED 16 PER CENT ANNUAL
INCREASE IN EARNINGS, IN 1982, AND IT WAS
THIS SYSTEM WHICH HAS PRODUCED A REAL WAGE CUT OF 5 PERoCENT
OVER THE PAST 3 YEARS A CUr OF 5 PER CENT IN AUSTRALIA
WHICH COMPARES WITH A FALL OF 1 PER CENT IN rHE US AND A
RISE OF 10 PER CENT IN THE UK.
AGAINST T; AAT BACKGROUND THIS IS HARDLY THE TIME TO BE
AIANDONING S0 WELL. TRIED AND SUCCESSFUL A SYSTEM OF WAGES
FIXATIONINTEREST nAfES HAVE RECENTLY RISEN RELATIVE TO
WORLD LEVELS IN ORDER TO PROVIDE SOME STABILITY TO THE
CURREN v
CLEARLY TIS BUDGET REDUCES THE DEFICIT BY OVER $ 2 BILLION.
THE NET DOND SELLING TASK IS ZERO. THE DIRECT CLAIM ON THE
FINANCIAL nARKETS HAS THUS BEEN SHARPLY REDUCEDTHIS
BUDGET IS INTENDED TO PROVIDE SCOPE TO SHIFT THE BURDEN
OF POLICY AWAY FROM MONETARY POLICY.
IT WILL HELP TO TAKE PRESSURE OFF INTEREST RATES AND
CONTRIBUTE TO GREATER STABILITY OF THE CURRENCY.
IN THESE WAYS AND BY PROVIDING CONFIDENCE THAT POLICIES ARE
IN PLACE TO COPE WITH OUR EXTERNALLY IMPOSED DIFFICULTIES,
THE BUDUET WILL PROVIDE A SOUND BASIS FOR LONG-TERM
INVESTMENT DECISIONS AS THE YEAR PASSES.
LADIES AND GENTLEMEN
I BEGAN THIS ADDRESS WITH THE ' MAGIC PUDDING" AND I WOULD
LIKE TO END THERE AS WELL.
YOU MAY REMEMBER THAT THE PUDDING WAS PRONE TO RUNNING AWAYON
ONE OCCASION BILL BARNACLE SAID:
efYO HAVE TO BE AS SMART AS PAINT ' 10 KEEP THIS PUDDIN'
IN ORDER-HES THAT ARTFUL A LAWYER COULDN'T MANAGE
H 114"
THERE HAVE B3EEN TIMES OVER THE PAST FEW MONTHS WHEN I COULD
EASILY HAVE AP'PLIED THAT QUOTATION TO THE AUSTRALIAN1
ECONOMY. I GUESS WE HAVE MANAGED TO ACHIEVE SO MUCH TO PUT OUR
ECONOMY IN ORDER BECAUSE THERE IS MORE THAN THE ART OF THE LAWYER
SPREAD LIBERALLY THROUGH THIS GOVERNMENT.
WE PROMISED GROWTH, JOBS AND WAGES MODERATION IN 1983 AND
WE DELIVEREDON BEHALF UF THE GOVERNME* NT I PROMISED IN my ADDRESS TO Tkil
NATION EXPUMDITURE RESTRAINT, SPREAD FAIRLY, AND A
RESPONSIBLE APPROACH TO INCOMES POLICY AND WE HAVE
DELIVEREDI GIVE YOU AGAIN MY SOLEMN PLEDGE. THIS GOVERNMENT IS
GUIDED BY TKE NEED TO DO THE BEST FOR ALL AUSTRALIA. THIS
GOVERNMENT IS THE ONE GOVERNMENT WHICH WILL DO WHATEVER
REALISTICALLY CAN BE DONE TO SECURE LONG IERM GROWTH IN JOBS
AND WITH TEHAT GROWTH IN AUSTRALIA'S WEALrH AND LIVING
STANDARDSTHIS BUDGET IS A FURTHER SUBSTANTIAL INSTALMENT ON THAT
COMM ITMENTSUm