COMMONWEALTH OF AUSTRALIA
SPEECH BY
The Rt Hon. J. G. GORTON, M. P.
ON
REDUCTIONS IN COMMONWEALTH
GOVERNMENT EXPENDITURE
Ministerial Statement
[ From the ' Parliamentary Debates', 16 February 19711
Mr GORTON ( Higgins-Prime Minister)
by leave-Mr Speaker, I recently spoke
to the nation on the state of the economy
and on the likely inflationary effects of the
Commonwealth Conciliation and Arbitration
Commission's award of a 6 per cent
increase in wages and salaries. I said then
that in order to decide what action should
be taken now, Cabinet had sought to
discover the areas in which demand seemed
to be growing most strongly. One of those
areas is the public sector-spending by
governments-and we believe one of the
first lines of attack on rising costs and prices
should be to restrict what is being spent in
that area.
When our Budget was introduced last
August it was estimated that total ' Commonwealth'
expenditure would be $ 7,883m.
I should say here, I think, that although
called Commonwealth expenditure, this
amount included $ 2,708m for reimbursement
grants and other payments to the
States. Indeed, such payments made up
more than one-third of the Commonwealth
Budget. The total increase was 11.2 per
cent more than the year before. But since
that Budget was formulated the Government
has been faced with significant additional
expenditure. The national wage case
decision and other wage, determinations are
estimated to add directly, in the rest of this
financial year, S88m to the Commonwealth's
own wage and salary bill in 1970-71. In
11791/ 71 addition, those wage determinations,
because they have led to an increase in
average wages greater than was expected,
will require the Commonwealth to pay an
additional $ 20m to the States under the
formula between the Commonwealth and
the States. In addition, we will need to pay
some $ 58m to the States in this financial
year to recompense them for the loss of
the receipts duty tax on which they had
budgeted. Mainly as a result of these two
outlays, payments to the States are now
expected to exceed the Budget estimates by
some $ 83m, and emergency payments
associated with recent floods will doubtless
increase the outlays required.
Other additional demands on our
resources since the Budget was brought
down include the provision of $ 12m as a
capital advance to the Australian Wool
Commission, and we believe some $ 6m will
be required this finanicial year for rural debt
reconstruction and farm adjustment. We
must also expect increases in costs of the
material used by the Government. So all in
all, it is estimated by the Treasury that the
net increase in expenditure since the Budget
was prepared would amount to approximately
$ 242m, if departments were provided
with the sums they have asked for.
This is the background against which wve
have decided that we should make reductions
in what would otherwise have been
spent.
Having made a complete and detailed
survey of Commonwealth expenditures, we
propose to reduce the amounts which
departments have sought by some $ 75m in
the remaining months of this financial year.
These reductions are made across the whole
range of Commonwealth departments, but
they do not involve any reductions in our
payments to the States. Our object has been
to effect reductions in the Commonwealth
expenditures for Commonwealth purposes.
We have not sought to achieve this at the
expense of the States. A dissection of the
reduction of $ 75m as between the main
categories of Commonwealth expenditure
is provided in a table which,* with the
concurrence of honourable members, I
incorporate in Hansard.
REDUCTIONS IN ESTIMATED COMMONWEALTH
EXPENDITURES Reduction on re-
Budget Revised vised Latest
measttie-measttie-measttei-measttei-
Smn Sm Sm Smn
Defence Services .1137.0 1,170.6 21.5 1,149.1
P=~ n to or for the
Saeand Works and
Housing Programmes 2,7081 2,791.6 .2,791.6
National Welfare Fund 1,472.9 1,475.8 0.7 1,475.1
RearainSrie 313.5 317.6 1.8 315.8
Debt Charges 103.9 99.0 99.0
Decartmental Running
Expenses 510.3 551.0 8.8 542.2
Territories ( excl. Papua
and New Guinea) 96.3 103.1 2.5 100.6
External Economic Aid
( inc. Papua and New
Guinea) 166.2 168.4 3.8 164.6
Commonwealth Payments
to Industry 271.5 285.4 8.5 276.9
Other Expenditures 412.6 426.2 5.9 420.3
Advances for Capital
Purposes--Post Office 240.0 262.0 10.0 2.52.0
Other 203.1 221.8 3.7 218.1
Other Capitalorks and
Services 247.3 252.2 8.3 243.9
Total Expenditures 7,882.7 8,124.7 75.5 8,049.2
Further details of the various reductions
will be provided as necessary by individual
Ministers. These reductions are spread right
across the board, but it will be observed
that the areas where the more substantial
savings have been made are defence, capital
works and capital advances, and departmental
running expenses. We were particularly
anxious to effect economies in
administrative expenditures, including the
overtime and salary expenditures of Commonwealth
departments. At the same time
we have endeavoured to avoid reducing
expenditures on essential development activities. In more general terms we have
sought to reduce the contribution of Commonwealth
expenditures to total demand
and to curb the Commonwealth's demands
on the labour market.
Thus the reductions in departmental
expenditures will involve restraint on Public
Service employment. The Public Service
Board reported to me that a routine
statistical projection made prior to my
instructions indicated an increase in
1970-71, in full-time employment under the
Public Service Act, of 4.6 per cent on the
numbers employed as at 30th June 1970.
In 1969-70 the comparable increase was 4.8
per cent, whilst the increase in total
civilian and defence forces employment in
the community was 4 per cent. The Board
advised me that my instructions for
restraint on establishment increases could
benefit the health and soundness of administration
in the Commonwealth Service, and it
suggested that a limitation should be placed
on the increase in Service employment.
The Public Service Board has now
reported to me that in its discussions with
departments, it has stressed the Government's
policy of restraint but has not
endeavoured to impose arbitrary cuts in
employment in particular directions. The
Board's recommendation, which has been
accepted, was that departmental increases
in employment, which will be kept to the
minimum, should not exceed at 30th June
1971 an overall increase in the Service of
3.4 per cent as compared with numbers
employed under the Public Service Act on
30th June 1970. This is a reduction of
about 25 per cent on the projected increase
in employment disclosed in the Board's
earlier survey; or put another way, the
Board's original projection was that the
Service would grow by 10,534 in 1970-71.
This growth has been cut by 2,735.
The Commonwealth has, I believe,
moved quickly and firmly in the area
available to it. It is necessary to do so. For
as we see it, the best interests of the community
require that inflation shall be overcome,
and one of the first steps to this end
must be action to restrain our own
expenditures. I present the following paper:
Reductions in Commonwealth Government
Expenditure-Ministerial Statement, 16 February
1971.
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