PREMIERS' CONFERENCE 19 JUNE 1975
OPENING STATEMENT BY THE PRIME MINISTER
THE HON. E. G. WHITLAM, M. P.
THERE HAS BEEN MORE PREPARATION FOR THIS THAN FOR
OTHER MEETINGS OF AUSTRALIAN HEADS OF GOVERNMENT. THE
PREPARATION MUST BE HELPFULJ. OUR OFFICIALS HAVE MET. YOU
HAVE PROVIDED US WITH BACKGROUND INFORMATION AND) WITH A JOINT
STATEMENT OF YOUR PROPOSALS. WE HAVE RESPONDED TO THOSE
PROPOSALS AND HAVE INDICATED MATTERS WHICH WE SEE AS OPEN FOR
DISCUSSION TODAY. THIS MEETING WILL NOT REMOVE ALL THE
MISUNDERSTANDINGS OR THE DISAGREEMENTS BETWEEN THE AUSTRALIAN
AND STATE GOVERNMENTS, BUT THE PREPARATION MEANS THAT WE MEET
WITH A BETTER UNDERSTANDING OF THE PROBLEMS BEFORE US. THIS
DEVELOPMENT IS ONE WHICH I HAVE ENCOURAGED AND IN WHICH YOU
HAVE ALL CO-OPERATED, AND I THANK YOU FOR THAT CO-OPERATION.
A CRUCIAL ITEM OF OUR AGENDA IS, OF COURSE, THE
REVIEW OF GENERAL REVENUE ASSISTANCE ARRANGEMENTS. HOWEVER,
BEFORE TURNING TO THAT, I WANT TO REFER BRIEFLY TO CO-OPERATIVE
K~ jANNING AND REGIONALISM WHICH I HAVE PROPOSED FOR LATER
DISCUSSION. I MUST MAKE IT CLEAR THAT THE AUSTRALIAN GOVERNMENT
DOES NOT REGARD THE PRESENT APPROACH TO DETERMINING REVENUE
ASSISTANCE ARRANGEMENTS AS SATISFACTORY. STATE EXPENDITURES
ARE LARGELY TAKEN AS GIVEN. THERE IS NO EXPLICIT CONSIDERATION o o / 2
2,
OF PROPER BALANCE BETWEEN STATE PROGRAMS AM) RELATED AUSTRALIAN
GOVERNMENT PROGRAMS. INSTEAD, AND BY TRADITION, FINANCIAL
FACTORS ARE CONSIDERED LARGELY IN TERMS OF THE YEAR
IMMEDIATELY AHEAD.
CO-OPERATIVE PLANNING
THE AUSTRALIAN GOVERNMENT WILL BE SEEKING IN THE
LONGER TERN A MORE RATIONAL AND CO-ORDINATED SYSTEM OF ASSESSING
NEEDS, SETTING PRIORITIES AM) ALLOCATING RESOURCES IN THE PUBLIC
SECTOR ONE BASED ON CO-OPERATION BETWEEN GOVERNMENTS. IT MAY
TAKE YEARS TO DEVELOP A NEW APPROACH OF THE KIM) W4E HAVE IN
MIND, OF THE KIM) DISCUSSED AMONG OUR OFFICIALS. BUT WE
BELIEVE A START SHOULD BE MADE NOW.
THE VIEW OF THE AUSTRALIAN GOVERNMENT IS THAT IN
SEEKING BETTER CO-OPERATIVE PLANNING ARRANGEMENTS IT WOULD BE
BEST TO BEGIN WITH PARTICULAR IMPORTANT FUNCTIONS WHERE THERE
IS A CLEAR NEED FOR CO-ORDINATION AM) WHERE EARLY PROGRESS SEEMS
POSSIBLE. THREE SUCH FUNCTIONS HAVE BEEN SUGGESTED IN THE
DISCUSSIONS AMONG OUR OFFICERS TRANSPORT, HEALTH AM) URBAN
DEVELOPMENT. LET ME ILLUSTRATE WHAT WE HAVE IN MIN) BY REFERRING
TO URBAN AM) REGIONAL DEVELOPMENT WHERE IMPORTANT FACTORS
DETERMINING DEVELOPMENT ARE PLANNED AM) FUNDED AT DIFFERENT
LEVELS OF GOVERNMENT. THE AUSTRALIAN GOVERNMENT IS RESPONSIBLE
FOR THE RETICULATION OF TELECOMMNICATIONS. THE STATE SEMIGOVERNMENTAL
AM) LOCAL AUTHORITIES ARE RESPONSIBLE FOR THE / 3
3.
RETICULATION OF WATER AND) SEWERAGE. THE NEED FOR OVERALL
CO-ORDINATION IS OBVIOUS.
MORE THAN $ 4,500 MILLION IS CURRENTLY BEING SPENT ON
TRANSPORT EACH YEAR AND THAT IS MORE THAN 12 PER CENT OF
GROSS NATIONAL EXPENDITURE. THE DECISIONS BY EACH LEVEL OF
GOVERNMENT ON THE ALLOCATION OF RESOURCES TO THE MODES OF
TRANSPORT FOR WHICH IT IS RESPONSIBLE SHOULD BE CONSISTENT
S WITH THE DECISIONS BY OTHER LEVELS IF THIS MONEY IS TO BE
WELL SPENT. WE BELIEVE THAT OUR DECISIONS ON THE ALLOCATION OF
RESOURCES TO AIRPORTS AND AIRWAYS FACILITIES SHOULD BE MADE
WITH KNOWLEDGE OF THE STATES? VIEWS ON THEIR PRIORITY RELATIVE
TO OTHER MODES OF TRANSPORT. SIMILARLY WE WOULD EXPECT THE
STATES' DECISIONS ON THE ALLOCATION OF RESOURCES TO PORTS TO
S BE MADE WITH KNOWLEDGE OF OUR VIEWS.
THERE HAVE BEEN IMPORTANT DEVELOPMENTS IN RECENT YEARS.
SINCE 1969 ROADS ASSISTANCE HAS BEEN BASED ON A SURVEY UNDERTAKEN
JOINTLY BY AUSTRALIAN AND STATE AUTHORITIES. THE AUSTRALIAN
GOVERNMENT IS NOW REPRESENTED ON STATE URBAN TRANSPORT PLANNING
BODIES. REGIONAL ADVISORY COMMITTEES HAVE BEEN ESTABLISHED TO
PARTICIPATE IN THE PLANNING OF MAJOR AIRPORTS.
APART FROM PARTICULAR DEVELOPMENTS, THE AUSTRALIAN
TRANSPORT ADVISORY COUNCIL HAS BECOME THE MAJOR FORUM ON THE 4
PROBLEMS OF PUBLIC TRANSPORT SERVICES, MAIN RAILWAY LINES AND)
ROADS. THE AUSTRALIAN GOVERNMENT HAS RECENTLY TAKEN THE
INITIATIVE IN INTRODUCING AVIATION MATTERS INTO ATAC, AND IN
SEEKING CONSIDERATION THERE OF THE QUESTION OF RESOURCE
ALLOCATION TO TRANSPORT GENERALLY. IT IS THIS LATTER
DEVELOPMENT WHICH WE BELIEVE SHOULD BE ENCOURAGED AND
ACCELERATED. I UNDERSTAND THAT ATAC WILL BE REVIEWING ITS
MACHINERY AT ITS MEETING NEXT MONTH. I SUGGEST WE SHOULD ASK
BOTH ATAC AND THE PORTS AND MARINE COUNCIL TO REPORT BACK TO
US ON HOW BEST TO PROCEED WITH THE DEVELOPMENT OF WIDER
CO-OPERATIVE PLANNING ARRANGEMENTS OF THE KIND DESCRIBED.
A SUJMMARY OF POINTS OF POSSIBLE AGREEMENT ON
CO-OPERATIVE PLANNING HAS BEEN CIRCULATED TO YOU. I ASK YOU
TO NOTE TEAT THEY ARE SIMPLY INTENDED TO FORM A FRAME OF
REFERENCE AGAINST WHICH OFFICIALS AND MINISTERS CAN PROCEED
WITH FURTHER EXAMINATION IN THE MONTHS AHEAD SO THAT MORE
CONSIDERED REPORTS CAN BE PUT BEFORE US AT A FUTURE TIME.
THERE IS NO COMMITMENT INVOLVED IN AGREEING TO THIS
SET OF POINTS, OTHER THAN THAT FURTHER STUDY BE UNDERTAKEN
CO-OPERATIVELY BETWEEN OUR OFFICIALS. ON THAT BASIS I WILL BE
ASKING THAT PREMIERS INDICATE THEIR AGREEMENT WHEN WE CONE TO
DISCUSSION OF THAT ITEM.
REGIONAL POLICY THE AUSTRALIAN GOV'ERNMENT HAS LAID CONSIDERABLE STRESS
ON THE ADOPTION OF A REGIONAL APPROACH TO PLANNING AND DECISIONMAKING.
THE AUSTRALIAN ASSISTANCE PLAN AND THE AREA IMPROVEMENT
PROGRAM ARE EXAMPLES OF PROGRAMS DELIVERED ON A REGIONAL BASIS.
A STATEMENT OF THE AUSTRALIAN GOVERNMENT'S REGIONAL POLICY WAS
MADE BY ME ON 18 JUNE.
IN BRIEF, THE AUSTRALIAN GOVERNMENT HAS ADOPTED, AS A
BASIS FOR ITS REGIONAL POLICY, THESE OBJECTIVES:
SERVICES AND PROGRAMS OF THE AUSTRALIAN GOVERNMENT
SHOULD BE PROVIDED ON A REGIONAL BASIS UYNLESS IT IS
INAPPROPRIATE TO DO SO, WITH REGARD TO EFFICIENCY,
ECONOMY AND EFFECTIVENESS.
REGIONAL BODIES OR ORGANISATIONS SHOULD BE GIVEN A
RESPONSIBILITY FOR THOSE SERVICES WHEREVER POSSIBLE,
NOTING THAT THIS RESPONSIBILITY MAY RANGE FROM DIRECT
INVOLVEMENT IN DECISION-MAKING THROUGH TO CONSULTATION..
PUBLIC PARTICIPATION IN PLANNING AND DECISION-MAKING
FOR, AND IMPLEMENTATION OF, PROGRAMS SHOULD BE
ENCOURAGED AND ASSISTED.
STATE AND LOCAL GOVERNMENT SHOULD BE ENCOURAGED TO
DELEGATE TO REGIONAL BODIES MORE RESPONSIBILITY FOR
THOSE STATE AND LOCAL GOVERNMENT PROGRAMS WHICH ARE
MOST APPROPRIATELY DELIVERED AT THE REGIONAL LEVEL AND
TO FOSTER PUBLIC PARTICIPATION.
ARRANGEMENTS FOR THE IMPLEMENTATION OF THE AUSTRALIAN
GOVERNMENT'S REGIONAL POLICY WILL NEED TO BE FLEXIBLE. THERE MAY
BE DIFFERENCES FROM STATE TO STATE, AND REGION TO REGION,
BECAUSE OF PARTICULAR CIRCUMSTANCES.
REVIEW OF GENERAL REVENUE ASSISTANCE ARRANGEMENTS
I NOW SHOULD LIKE TO MAKE SOME OBSERVATIONS ON THE
ECONOMIC CONTEXT IN WHICH THE REVIEW OF GENERAL REVENUE
ASSISTANCE ARRANGEMENTS IS TO BE MADE. I SHALL THEN
DEAL MORE SPECIFICALLY WITH OUR VIEWS ON WHAT THE NEW
FINANCIAL ASSISTANCE ARRANGEMENTS SHOULD BE.
IN THE PAST EIGHTEEN MONTHS THE MAJOR ECONOMIES OF THE
WORLD SEVERELY AFFECTED BY THE OIL PRICE RISE AND THE
DESTABILISING EFFECTS OF THAT ON WORLD TRADE AND INVESTOR
CONFIDENCE HAVE BEEN STRUGGLING WITH THE TWIN PROBLEMS OF
RISING UNEMPLOYMENT AND RISING INFLATION. AUSTRALIA HAS NOT
BEEN ABLE TO INSULATE ITSELF FROM THAT WORLD SITUATION.
BUT IN AUSTRALIA AS IN OTHER COUNTRIES THE BATTLE IS
NOW ON TO RESTORE A MORE BALANCED ECONOMIC ORDER, WE ARE SEEING
ECONOMIC GROWTH BEGINNING AGAIN. THE RISE IN UNEMPLOYMENT SEEMS
TO HAVE COME TO AN END AND 1975/ 76 PROMISES TO SEE EMPLOYMENT
OPPORTUNITIES ON THE INCREASE AGAIN. BUT INFLATION REMAINS DEEPSEATED.
FIRM AND RESPONSIBLE POLICIES WILL HAVE TO BE FOLLOWED
IF IT IS TO BE BROUGHT UNDER CONTROL. INFLATION AT A RATE
APPROACHING 20 PER CENT A YEAR IS INTOLERABLE. IT WRECKS
CONFIDENCE, DISCOURAGES PRIVATE INVESTMENT, ROBS ORDINARY PEOPLE
OF THE VALUE OF THEIR SAVINGS AND PREVENTS GOVERNMENTS FROM
PURSUING CONSISTENTLY AND IN A PROPERLY PLANNED WAY THE IMPORTANT
SOCIAL AND DEVELOPMENTAL PROGRAMS WE WERE ELECTED TO PURSUE. 7
SOME OF THE UNCERTAINTIES THAT SURROUNDED THE OUTLOOK FOR
INFLATION EARLIER THIS YEAR HAVE BEEN CLEARED BY THE DECISIONS OF
THE CONCILIATION AND ARBITRATION COMMISSION IN'THE NATIONAL WAGE
AND METAL INDUSTRIES CASES. THOSE WERE RESPONSIBLE DECISIONS.
GOVERMENTS MUST ALSO DO ALL THEY CAN TO CREATE AN ECONOMIC CLIMATE
IN WHICH THE SUGGESTED WAGE DETERMINATION GUIDELINES HAVE THE
PROSPECT OF BEING ADHERED TO. A BIG RESPONSIBILITY ALSO FALLS ON
THE COMMUNITY ITSELF HERE AND, IN PARTICULAR, ON UNION LEADERSHIP.
THIS CONFERENCE COULD PLAY ITS PART BY EXPRESSING A FIRM
COMMITMENT BY GOVERNMENTS TO ACTION TO ENSURE OBSERVANCE OF THE
PRINCIPLES SET OUT IN THE NATIONAL WAGE CASE DECISION IN PARTICULAR
IN RESPECT OF PUBLIC EMPLOYMENT WITHIN GOVERNMENT CONTROL. WE WILL
BE DISCUSSING THIS UNDER THE AGENDA ITEM ON WORKING PARTIES ON
INFLATION BUT I MENTION HERE THAT I HAVE ASKED ALL MY MINISTERIAL
COLLEAGUES TO ACT CONSISTENTLY IN HANDLING WAGE CLAIMS WHICH ARISE
IN THEIR INDIVIDUAL AREAS OF RESPONSIBILITY IN THE LIGHT OF THE
NATIONAL WAGE CASE DECISION.
FOR OUR PART, WE AIM TO ENSURE THAT THE RECOVERY IN THE
ECONOMY STRENGTHENS AND CONTINUES BUT DOES NOT REACH A PACE THAT
ONCE AGAIN LEADS TO A SCRAMBLE FOR RESOURCES. AN ORDERLY RECOVERY
WILL HELP ACHIEVE A CLIMATE CONDUCIVE TO THE EXPANSION OF
INVESTMENT THAT IS NECESSARY TO ENSURE CONTINUED PROSPERITY AND
GROWTH OF EMPLOYMENT OPPORTUNITIES.
LET ME NOW TURN BRIEFLY TO SOME OF THE FEATURES OF THE
CURRENT ECONOMIC SCENE.
THE OPENING MONTHS OF 1975 HAVE SEEN A STRONG RECOVERY
OF CONSUMER DEMAND. COUPLED WITH CONTINUED GROWTH OF GOVERNMENT
EXPENDITURE AND EXPORTS THIS HAS RESULTED IN A SIZABLE INCREASE IN
TOTAL DEMAND IN SPITE OF DECLINING PRIVATE INVESTMENT.
HOWEVER, DEMAND GROWTH HAS BEEN MORE THAN MET BY SUPPLY FROM .18
SWOLLEN STOCKS. AS A RESULT THERE HAS BEEN LITTLE INCENTIVE TO
INCREASE PRODUCTION AND EMPLOYMENT, BUT THIS IS EXPECTED TO
STRENGTHEN FROM NOW ON AS STOCKS RETURN TO MORE NORMAL LEVELS.
GROWTH IN THE VOLUME OF MONEY HAS BEEN EXCEPTIONALLY
STRONG. THE PERIOD OF SEASONAL TIGHTENING OF LIQUIDITY AT
THE END OF THE FINANCIAL YEAR IS PASSING WITH ONLY MINOR
STRAINS ON FINANCIAL MARKETS; BANKS WILL ENTER THE SEASONAL
UPSWING WITH EXTREMELY HIGH LIQUIDITY RATIOS.
UNEMPLOYMENT SHOWED SIGNS OF IMPROVEMENT IN MAY AND
A CONTINUED GRADUAL DECLINE IS CURRENTLY IN PROSPECT. THIS
IMPROVEMENT OWES MUCH TO EXPANDED GOVERNMENT SPENDING BUT
INDICATIONS ARE THAT THE TREND IN PRIVATE SECTOR EMPLOYMENT
WILL SOON TURN UPWARDS ONCE AGAIN.
THE BALANCE OF PAYMENTS POSES NO IMMEDIATE PROBLEMS
BUT HERE AGAIN THE OUTLOOK FOR TWELVE MONTHS HENCE IS
DEPENDENT ON THE COURSE OF DEMAND AND INFLATION.
IT IS PLEASING TO NOTE THAT THE RATES OF INCREASE OF
BOTH PRICES AND WAGES SLOWED SOMEWHAT DURING THE MARCH QUARTER.
HOWEVER, EVEN THOUGH INFLATION RATES HAVE RECENTLY FALLEN
SOMEWHAT THEY REMAIN HIGH; THE CONSUMER PRICE INDEX INCREASED
BY 3.6 PER CENT IN THE MARCH QUARTER AND 17.6 PER CENT IN THE
YEAR TO MARCH. SUCH RATES ARE MUCH TOO HIGH AT THE OUTSET OF
A RECOVERY PHASE AND FOLLOWING, AS THEY DO, SIMILAR RATES OF
INCREASE FOR THE PAST TWELVE MONTHS. ONE THING IS CLEAR
THERE HAS TO BE SOME ABATEMENT IN THE RATE OF INCREASE IN
GOVERNMENT SPENDING IF WE ARE TO GET OUT OF OUR PRESENT TROUBLES.
GOVERNMENT EXPENDITURE ON FINAL GOODS AND SERVICES
( AN APPROXIMATE MEASURE OF THE NATION'S PRODUCTION DIRECTLY
CONSUMED BY THE GOVERNMENT SECTOR) HAS RISEN FROM 20 PER CENT
OF TOTAL NATIONAL EXPENDITURE TO 23 PER CENT IN THE COURSE OF
A YEAR. AUSTRALIAN GOVERNMENT TOTAL BUDGET OUTLAYS INCLUDING
ASSISTANCE TO THE STATES HAVE RISEN FROM BETWEEN 24 AND
PER CENT OF GDP IN THE PRECEDING THREE YEARS TO OVER 30 PER
CENT THIS YEAR. IN 1974/ 75 IT WAS APPROPRIATE TO MAKE USE OF
RESOURCES THAT WOULD OTHERWISE HAVE REMAINED IDLE IN THE
PRIVATE SECTOR, BUT THE SHIFT OF RESOURCES TO THE PUBLIC
SECTOR CANNOT CONTINUE AT THAT RATE IF THE ECONOMY IS TO BE
GOT BACK ON ITS FEET. IN THE COMING FINANCIAL YEAR THERE WILL
NEED TO BE MODERATION IN PUBLIC SECTOR SPENDING.
I COME TO THE MAIN FINANCIAL QUESTIONS WHICH ARE OF
IMMEDIATE CONCERN TO THIS MEETING SPECIFICALLY THE MATTER OF
GENERAL REVENUE GRANTS IN 1975/ 76 AND SUBSEQUENT YEARS AND THE
MATTER OF THE LOAN COUNCIL PROGRAMS OF THE STATES AND THEIR
AUTHORITIES IN 1975/ 76.
THE PRESENT GENERAL REVENUE ASSISTANCE ARRANGEMENTS
WERE ORIGINALLY SETTLED AT A PREMIERS' CONFERENCE [ N JUNE 1970.
AT THAT TIME THE AUSTRALIAN GOVERNMENT UNDERTOOK TO REVIEW
THE ARRANGEMENTS AFTER FIVE YEARS. ALTHOUGH THE LEGISLATION
UNDER WHICH THE FINANCIAL ASSISTANCE GRANTS ARE PAID -THE
STATES GRANTS ACT 1973/ 74 HAS INDEFINITE APPLICATION INTO
THE FUTURE, WE ACCEPT THE OBLIGATION TO REVIEW THE ARRANGEMENTS.
THE SPECIFIC QUESTION BEFORE US IS WHETHER ANY CHANGES IN
THE LEGISLATION TO WHICH I REFERRED ARE DESIRABLE. YOU HAVE
PROPOSED RADICAL CHANGES IN THAT LEGISLATION. YOUR MAIN
PROPOSALS ARE THAT THE BASE ON WHICH THE FORMUJLA GRANTS IN
1975/ 76 ARE CALCULATED BE INCREASED BY $ 350 MILLION AND THAT
THE PRESENT AVERAGE WAGES ELEMENT IN THE FORMULA BE REPLACED
BY A NEW PROGRESSION FACTOR EQUAL TO 1.~ 5 TIMES THE INCREASE
IN AVERAGE WAGES EACH YEAR. I HAVE ALREADY INFORMED YOU
THAT THE AUSTRALIAN GOVERNMENT DOES NOT ACCEPT THESE
PROPOSALS. WE REJECT THEM FOR FOUR I14TER-RELATED REASONS.
FIRST, WE REJECT THE CONCEPT ON WHICH THE STATES'
PROPOSALS ARE BASED THAT IS, THAT THE GRANTS ARRANGEMENTS
SHOULD BE BASED, IN EFFECT. ON REIMBURSEMENT OR COMPENSATION
FOR INCOME TAX FORGONE. THAT CONCEPT HAS LONG BEEN
ABANDONED. SUCCESSIVE AUSTRALIAN GOVERNMENTS HAVE TAKEN
THE VIEW THAT IT IS MORE LOGICAL AND APPROPRIATE THAT THE
0 GRANTS BE BASED ON THE STATES' FINANCIAL NEEDS RATHER THAN
ON MOVEMENTS IN ONE OF THE REVENUE SOURCES FROM W# HICH THE
FINANCIAL ASSISTANCE GRANTS ARE FINANCED.
SECONDLY, WE HAVE DOUBTS ABOUT THE WAY THE BASIC
CONCEPT HAS BEEN APPLIED. SPECIFICALLY, WE NOTE THAT THE
PROPOSALS ARE, AT LEAST IMPLICITLY, BASED ON THE ASSUMPTION
THAT PRESENT INCOME TAX RATES WILL REMAIN UNCHANGED
INDEFINITELY. GIVEN THE EFFECTS OF THE PROGRESSIVE RATE
STRUCTURE OF THE PERSONAL INCOME TAX AS WAGE AND SALARY RATES
RISE, THAT SEEMS TO US TO BE A QUITE UNJUSTIFIED ASSUMPTION.
WITHOUT DISCUSSING THIS ASPECT IN DETAIL, I CAN SUMMARISE
BY SAYING THAT IN OUR VIEW IT MEANS THAT THE STATES' PROPOSALS
ARE TOO GENEROUS EVEN BY THEIR OWN CRITERION.
THE THIRD REASON IS A MORE COMPLEX ONE AND I CAN
REFER TO IT ONLY BRIEFLY HERE. IT IS, IN ESSENCE. THAT
ACCEPTANCE OF THE STATES' PROPOSALS COULD INVOLVE, IN TIMES
OF RAPID INCREASES IN WAGE AND SALARY RATES, AN UNDUE TRANSFER
OF FINANCIAL RESPONSIBILITY FROM THE STATES TO THE AUSTRALIAN
GOVERNMENT, PARTICULARLY IN RESPECT OF BUSINESS UNDERTAKINGS
AND SIMILAR ACTIVITIES. 000/ 11
THE BURDEN OF FINANCING THESE SERVICES COULD WELL
HE INCREASINGLY SHIFTEI) FROM Ti'll' USES OF THE SERVI(: ES. TO
THE AUSTRALIAN GOVERNMENT'S BUIDGET AND THENCE TO TAXPAYIElRS
IN GENERAL, WITIH THE SERVI]( 1CES IN OUESTION BECOMING, I N THAT
SENSE, MORE AND MORE UNECONOMIC. THE PRINCIPLE THAT THE
USER PAYS SHOULD SURELY APPLY TO TIHESE SERVICES JUST AS TO
POSTAL AND OTHER SUCH SERVICES PROVIDED BY THE AUSTRALIAN
GOVERNMENT. FINALLY, ALTHOUGH THE COSTS OF THE STATES'
PROPOSALS CANNOT BE PREDICTED ACCURATELY ( AS THEY WILL
DEPEND ON FUTURE MOVEMENTS IN POPULATION AND AVERAGE WAGES),
IT IS CLEAR THAT THEY WOULD BE FAR BEYOND WHAT COULD
REASONABLY BE EXPECTED TO BE BORNE BY THE AUSTRALIAN
GOVERNMENT'S BUDGET. EVEN ON MODEST ASSUMPTIONS ABOUT
MOVEMENTS IN POPULATION AND AVERAGE WAGES, THE ADDITIONAL
GRANTS RESULTING FROM THE STATES' PROPOSALS WOULD RUN INTO
MANY THOUSANDS OF MILLIONS OF DOLLARS OVER A FIVE YEAR AGREEMENT.
ONE PARTICULAR POINT THAT WE HAVE NOTED IN THIS
GENERAL BUDGETARY CONTEXT IS THAT THE STATES' PROPOSALS APPEAR
TO INVOLVE ADDITIONAL AJSTRAIAN GOVERNMENT FUNDS IN 1975/ 76
SU'FFICIENT TO MEET, AND ON THE FIGURES GIVEN TO US, POSSIBLY
MORE THAN MEET, THE STATES' PROSPECTIVE BUDGETARY " GAPS" IN
THAT YEAR ( ON THE BASIS OF EXISTING RATES OF TAXES AND CHARGES
AND PROJECTEID EXPENDITURE 1, EVELS). PARTICULARLY IN THE LIGHT
TIE AUSTIRALIAN GOVERNMENT'S OWN SEVERE BUDGETARY P* ROB,: lMS
TIIAT ) lDO: NSO T SELEM TO US TO BE REASONABLE.
ALTHOUGH THE AUSTRAIIAN GOVERNMENT THUS DOES NOT
ACCEPT THE STATES' PROPOSALS, Wt BELIEVE NEVERTHELESS THAT / 12
THERE IS A CASE FOR AN INCREASE IN THE LEVELS OF THE GRANTS
IN 1975/ 76 BEYOND THOSE WHICH WOULD BE YIELDED BY THE
EXISTING FORMULA AND THAT THERE IS A CASE FOR AN IMPROVEMENT
IN THE ANNUAL GROWTH PRODUCED BY THAT FORMULA.
IN COMING TO THAT JUDGEMENT WE HAVE HAD A NUMBER
OF CONSIDERATIONS IN MIND. NOTABLE AMONGST THEM HAS BEEN OUR
DESIRE TO ELIMINATE, OR AT THE VERY LEAST TO REDUCE AS FAR
AS POSSIBLE, WHAT HAS BECOME KNOWN AS THE ANNUAL " WRANGLE"
BETWEEN THE AUSTRALIAN AND STATE GOVERNMENTS.
WE HAVE OBSERVED IN THIS CONNECTION THAT OVER THE
LAST FIVE YEARS ASSISTANCE TOTALLING OVER $ 800 MILLION HAS
BEEN PROVIDED TO THE STATES OVER AND ABOVE THAT WHICH WOULD
HAVE BEEN YIELDED HAD THE ORIGINAL ARRANGEMENTS BEEN ADHERED
TO THAT FIGURE, INCIDENTALLY, EXCLUDES ABOUT $ 600 MILLION
IN ADDITIONAL GRANTS RESULTING FROM THE AUSTRALIAN
GOVERNMENT'S AGREEMENT TO COMPENSATE THE STATES FOR LOSS OF
RECEIPTS DUTY. OUR PROPOSALS ON THESE AND OTHER FINANCIAL MATTERS
ARE SPELLED OUT IN DETAIL IN A DOCUMENT WHICH WILL BE
CIRCULATED AT THE CONCLUSION OF THIS SPEECH, IN BRIEF, THE
AUSTRALIAN GOVERNMENT IS OFFERING TO:-
INCREASE THE FINANCIAL ASSISTANCE GRANTS ABOVE
WHAT THEY WOULD BE IN 1975/ 76 ON THE BASIS OF
EXISTING LEGISLATION BY A TOTAL OF $ 200 MILLION;
IMPROVE THE SUBSEQUENT RATE OF GROWTH OF THE
GRANTS BY INCREASING THE PRESENT BETTERMENT
FACTOR OF 1.8 PER CENT TO 3 PER CENT. / l 3
13
THERE WILL BE CLAIMS THAT THE INCREASE IN THE
BETTERMENT FACTOR BY 1.2 PER CENT TO 3 PER CENT DOES
NOT REPRESENT A VERY SIGNIFICANT CHANGE. HOWEVER, GIVEN
THE MAGNITUDE OF THE FINANCIAL ASSISTANCE GRANTS, THE
EFFECTS, PARTI CULARLY GIVEN THAT THEY WOULD BE CUMULATIVE
OVER THE YEARS, WOULD IN FACT BE SUBSTANTIAL. THE PRECISE
EFFECTS OF OUR PROPOSALS CANNOT BE ESTIMATED. AS YOU WILL
APPRECIATE, THEY WILL DEPEND ON FUTURE MOVEMENTS IN AVERAGE
WAGES AND POPULATION. ON THE BASIS OF CERTAIN ASSUMPTIONS
ABOUT WAGES AND POPULATION GROWTH, HOWEVER, WE ESTIMATE
THAT THE EFFECT OF OUR PROPOSALS WILL BE TO INCREASE THE
GRANTS, OVER THE FIVE YEARS BEGINNING IN 1975/ 76, BY
SOMETHING IN THE ORDER OF $ 2,200 MILLION. OF THIS, THE
INCREMENT TO THE 1975/ 76 GRANTS WOULD ACCOUNT FOR AROUND
$ 1,500 MILLION AND THE IMPROVEMENT TO THE BETTERMENT FACTOR
FOR AROUND $ 700 MILLION.
I EMPHASISE THAT THIS LARGE GAIN WILL BE
ON TOP OF THE GROWTH IN ASSISTANCE FLOWING FROM THE
PRESENT ARRANGEMENT. AS AN INDICATION OF THE GROWTH
PRODUCED BY THE PRESENT FORMULA IT IS ESTIMATED THAT
FINANCIAL ASSISTANCE GRANTS IN 1975/ 76 WILL BE AROUND
$ 600 MILLION HIGHER THAN IN 1974/ 75 EVEN WITHOUT THE
IMPROVEMENTS WE HAVE PROPOSED.
THESE PROPOSALS, WHEN-ADDED TO OTHER INITIATIVES ./ 14
14.
WHICH THE AUSTRALIAN GOVERNMENT HAS TAKEN IN THE FIELD
OF FEDERAL-STATE FINANCES, OR IN AREAS AFFECTING THOSE
FINANCES, REPRESENT VERY RADICAL CHANGES INDEED. IN
PARTICULAR I HAVE IN MIND THAT IN ASSESSING THE STATES'
OVERALL FINANCIAL POSITION ACCOUNT MUST BE TAKEN OF OUR
ASSUMPTION OF FULL RESPONSIBILITY FOR FINANCING
TERTIARY EDUCATION, THE NEW OR EXPANDED PROGRAMS OF
SPECIFIC ASSISTANCE OVER A WIDE RANGE OF ACTIVITIES
FOR WHICH THE STATES PREVIOUSLY HAD SOLE OR MAIN
RESPONSIBILITY, OUR OFFERS TO TAKE OVER THE STATES'
RAILWAYS, AND THE " MEDIBANK" SCHEME FOR SHARING THE
RUNNING COSTS OF PUBLIC HOSPITALS, AS WELL AS THE
PROPOSALS IN RELATION TO REVENUE GRANTS WHICH I HAVE
JUST OUTLINED. IN RESPECT OF TWO OF THESE MATTERS MEDIBANK
AND RAILWAYS NOT ALL OF THE STATES HAVE TAKEN ADVANTAGE
OF OUR OFFERS AND THEIR BUDGETS, RELATIVE TO THOSE STATES
WHICH HAVE, WILL SUFFER ACCORDINGLY.
THE PLAIN FACT IS THAT IF ALL STATES ACCEPTED
OUR OFFERS IN RELATION TO MEDIBANK AND THE TRANSFER
OF RAILWAYS THEIR BUDGETARY PROSPECTS, BOTH SHORT AND
LONG TERM, WOULD BE VERY MUCH BETTER INDEED THAN THEY
ARE NOW.
WE HAD HOPED THAT ALL THE STATES WOULD HAVE ENTERED THE
HOSPITAL SIDE OF MEDIBANK FROM 1 JULY 1975, UNDER THE PROPOSED
HOSPITAL AGREEMENTS WE WOULD HAVE ASSISTED THE STATES TO THE
EXTENT OF 50 PER CENT OF THE NET OPERATING COSTS OF PUBLIC
HOSPITALS. TASMANIA AND SOUTH AUSTRALIA SAW THE VALUE OF WHAT
WE WERE OFFERING AND WE HAVE ENTERED INTO AGREEMENTS WITH THEM.
WE HOPE THAT QUEENSLAND WILL FOLLOW. NEW SOUTH WALES, VICTORIA
AND WESTERN AUSTRALIA, INSTEAD OF HELPING US EXPEDITE THE
INTRODUCTION OF THE SCHEME IN THEIR STATES, AS LATE AS
MAY 1975 WERE WRITING TO ME PROPOSING NEW AGREEMENTS AGREEMENTS
THAT I INFORMED THEM ON 12 JUNE WERE COMPLETELY UNACCEPTABLE.
WITH GREATER CO-OPERATION THE HOSPITAL SYSTEMS 01" THOSE STATES
WOULD BE BENEFITING FROM MANY MILLIONS OF DOLLARS PROVIDED BY THE
AUSTRALIAN GOVERNMENT.
NONE OF YOU NEED REMINDING OF THE MAJOR BUDGETARY BURDENS
THAT ARE CAUSED BY THE LOSSES OF YOUR RAILWAYS SYSTEMS, I AM TOLD
THAT THE ESTIMATED DEFICITS FOR THE RAIL SYSTEMS IN 1974-75 EXCEED
$ 400 MILLION THREE TIMES AS MUCH AS THREE YEARS AGO CLEAR
EVIDENCE OF THE HIGH PRICE AUSTRALIA AS A NATION, AND EACH STATE
GOVERNMENT, IS PAYING FOR THE UNPLANNED, UNCO-ORDINATED APPROACH
TO RAIL TRANSPORT AND INDEED TRANSPORT GENERALLY, UNLIKE AUSTRALIA,
OTHER FEDERAL SYSTEMS OPERATE THEIR RAILWAYS ON A NATIONAL BASIS,
TASMANIA IS NOW TO BE RELIEVED OF THIS WORRY, IT WILL
ALSO RECEIVE POSITIVE FINANCIAL BENEFITS BECAUSE THE OFFSET TO ITS
FORMULA GRANTS BASE WILL BE LESS THAN THE RAILWAYS DEFICIT
OF WHICH IT WILL BE RELIEVED, TASMANIA'S NET GAIN
WILL BE $ 303 MILLION. THE SOUTH AUSTRALIAN GOVERNMENT HAS SOUGHT
A SIMILAR ARRANGEMENT IN RESPECT OF ITS NON-METROPOLITAN RAILWAY
SYSTEM ITS NET GAIN TO THE " BASE" WOULD BE $ 25 MILLION. / 16
I STATED IN MY 1972 POLICY SPEECH THAT MY GOVERNMENT
WOULD ACCEPT THE OFFERS OF THE NEW SOUTH WALES AND VICTORIAN
PREMIERS FOR A TRANSFER OF THEIR STATE RAILWAY SYSTEMS. DESPITE
A FORMAL INVITATION THESE OFFERS HAVE NOT BEEN RENEWED. SIMILAR
INVITATIONS HAVE BEEN MADE TO OTHER PREMIERS. IT IS OPEN TO THEM
TO FOLLOW THE LEAD OF THEIR MORE PROGRESSIVE BRETHREN IN SOUTH
AUSTRALIA AND TASMANIA. WE REMAIN PREPARED TO DISCUSS WITH EACH
STATE THE TRANSFER OF ITS RAILWAY SYSTEM TO THE AUSTRALIAN
GOVERNMENT. SURELY THIS IS ONLY GOOD SENSE GOOD SENSE FOR
THE STATES' FINANCIAL POSITION, AN) GOOD SENSE FOR AUSTRALIA IF
IT LEADS TOWARDS A TRULY NATIONAL RAILWAY SYSTEM.
IT MAY BE SUGGESTED THAT THE ADDITIONAL FUND) S NOW
OFFERED WILL DO TOO LITTLE TO DEAL SPECIFICALLY WITH THE MAIN
FACTOR CAUSING THE STATES' BUD3GETARY PROBLEMS NAMELY INFLATION.
IN CONSIDERING SUCH A VIEW, HOWEVER, IT HAS TO BE BORNE IN MIND
THAT, PARTICULARLY TAKING INTO ACCOUNT THE STATES' PAY-ROLL TAX
REVENUES A HIGH PROPORTION OF THE ADDITIONAL COSTS TO THE STATES
AR[ SING FROM INFLATION IS ALREADY AUTOMATICALLY RECOVERED BY
INCREASED FORMULA GRANTS AN) TAX RECEIPTS. FURTHERMORE, IT SEEMS
IMP3LICIT IN THE APPROACH PUBLICLY TAKEN BY SOME PREMIERS AT LEAST
THAT FOR SOME REASON IT IS APPROPRIATE THAT INCREASES IN PUBLIC
EXPENDITURES ATTRIBUTABLE TO INCREASES IN COST LEVELS SHOULD BE
BORNE BY THE AUSTRALIAN GOVERNMENT'S BUDGETS RATHER THAN BY THE
STATES'. THAT VIEW APPEARS, IN TURN, TO BE BASED ON A VIEW THAT
INCREASES IN INCOME TAX, UNLIKE INCREASES IN OTHER TAXES, ARE
SOMEHOW PAINLESS! IT IS SURELY NOW OBVIOUS TO US ALL THAT SUCH
A VIEW IS MISTAKEN. 0/ 17
17.
THERE IS AN OUTDATED ATTITUDE THAT INCOME TAXES ARE LESS
INFLATIONARY THAN INDIRECT TAXES. WAGE EARNERS ARE CONSCIOUS
OF HIGH MARGINAL INCOME TAX RATES, WAGE CLAIMS ARE MADE ACCORDINGLY.
FURTHER, THE MATHEWS COMMITTEE'S THESIS ON THE NEED TO INDEX INCOME
TAX AND THE ASPREY COMMITTEE'S VIEWS ON THE SHIFT[ NG OF INCIDENCE
TO INDIRECT TAXES ARE BOTH OPPOSED TO THIS OUTDATED ATTITUDE.
THE VERY REAL BENEFITS WHICH WOULD ACCRUE TO THE STATES
UNDER THE PROPOSALS I HAVE MADE SHOULD NOT BE OBSCURED OR LOST
SIGHT OF IN THE COMPLEX OF MATTERS WHICH MIGHT BE RAISED TODAY.
THE AUSTRALIAN GOVERNMENT PROPOSES THAT IF THE NEW SET OF
ARRANGEMENTS TO COMMENCE IN 1975-76 IS TO BE FOR FIVE YEARS, IT
OUGHT TO BE REVIEWED BEFORE THE END OF 1979-80. WE WOULD PROPOSE,
ALSO AGAIN FOLLOWING PAST PRACTICE, THAT THE ARRANGEMENTS WOULD BE
SUBJECT TO REVISION BEFORE THEN IF THERE OCCURRED SUBSTANTIAL
CHANGES IN AUSTRALIAN/ STATE FINANCIAL RELATIONSHIPS, OR IN MAJOR
FACTORS AFFECTING THOSE RELATIONSHIPS. IN PARTICULAR, THE
ARRANGEMENTS WILL BE SUBJECT TO THE STATES CONTINUING TO
REFRAIN FROM LEVYING TAXES ON INCOME,
THE AUSTRALIAN GOVERNMENT'S PROPOSALS ARE MADE ON THE
CLEAR UNDERSTANDING THAT SUBSEQUENT REQUESTS BY THE STATES FOR
ASSISTANCE SUPPLEMENTARY TO THAT YIELDED BY THE FORMULA WILL NOT
BE ENTERTAINED EXCEPT IN CIRCUMSTANCES WHICH ARE TRULY ABNORMAL
AND UNPREDICTABLE, AND WITH WHICH THE STATES ARE CLEARLY UNABLE
TO COPE UNAIDED.
THATIN TOTAL, IS OUR PROPOSAL ON REVENUE GRANTS FOR THE
NEXT FIVE YEARS. IT CLEARLY OFFERS CONSIDERABLE BENEFITS TO THE
STATES AND WE WOULD EXPECT IT TO BE ACCEPTED BY THE STATES. THE
ALTERNATIVE TO A NEW SET OF ARRANGEMENTS IS THOSE WHICH WOULD
CONTINUE UNDER EXISTING LEGISLATION AND THE STATES ARE, OF COURSE,
FREE TO CHOOSE THAT ALTERNATIVE.
I NOW TURN BRIEFLY TO THE MATTER OF GENERAL PURPOSE
CAPITAL FUNDS FOR THE STATES AND THEIR AUTHORITIES IN 1975-76.
IN A FORMAL SENSE, THESE ARE DECISIONS TO BE TAKEN IN AND BY THE
LOAN COUNCIL. BUT THESE FUNDS ARE, OF COURSE, A MOST IMPORTANT
ELEMENT IN THE STATES' FINANCES AND WE BELIEVE THAT IT IS
APPROPRIATE THAT THE STATES BE INFORMED RIGHT AT THE BEGINNING
OF THIS MEETING OF THE AUSTRALIAN GOVERNMENT; S PROPOSALS IN
AGGREGATE. AGAIN, OUR PROPOSALS ARE SET OUT IN DETAIL IN THE
DOCUMENT TO BE CIRCULATED.
IN BRIEF AND ABSTRACTING FROM SPECIAL FACTORS WE HAVE
IN MIND INCREASES IN THE LOAN COUNCIL PROGRAMS OF BOTH THE STATE
GOVERNMENTS AND THEIR " LARGER" AUTHORITIES OF JUST OVER
17 PER CENT. WE PROPOSE THAT, FOLLOWING THE PRACTICE OF SOME
YEARS NOW NO OVERALL LIMIT BE SET ON BORROWINGS BY SMALLER
AUTHORITIES. WE ALSO PROPOSE THAT, AS A MEASURE OF ASSISTANCE
TO SUCH AUTHORITIES, THE BORROWING LIMIT FOR INDIVIDUAL
AUTHORITIES BEFORE THEY HAVE TO BE INCLUDED IN THE " LARGER"
CATEGORY BE INCREASED FROM $ 500,000 TO $ 600,000. / 19
19.
WHILE SPEAKING OF THE CAPITAL FUNDS TO BE MADE
AVAILABLE TO THE STATES IN 1975-76 I MIGHT MENTION THE MATTER
OF ADVANCES TO THE STATES FOR WELFARE HOUSING IN THAT YEAR. THE
AUSTRALIAN GOVERNMENT'S DECISION ON THIS MATTER WILL BE MADE IN THE
BUDGET CONTEXT ANID THE STATES WILL THEN BE INFORMED. THE STATES
CAN, HOWEVER, COUNT ON GETTING NOT LESS THAN THE 1974-75 AMOUNTS.
LOCAL GOVERNMENT I SHOULD NOT PASS FROM THIS DISCUSSION OF REVENUE
ASSISTANCE WITHOUT ACKNOWLEDGING THE FINANCIAL PROBLEMS FACING
LOCAL GOVERNMENT. THE AUSTRALIAN GOVERNMENT HAS TAKEN SIGNIFICANT STEPS
TO MAKE LOCAL GOVERNMENT A MORE EFFECTIVE MEMBER OF THE FEDERAL
SYSTEM. THE ROLE OF THE GRANTS COMMISSION HAS BEEN WIDENED TO
INCLUDE LOCAL GOVERNMENT. IN 1974-75 THE AUSTRALIAN GOVERNMENT
MADE UNTIED GRANTS OF SOME $ 56 MILLION TO LOCAL GOVERNMENT
BODIES. OTHER ASSISTANCE HAS BEEN GIVEN TO LOCAL GOVERNMENT
THROUGH THE AREA IMPROVEMENT PROGRAM, THE NATIONAL ESTATE,
THE NATIONAL SEWERAGE PROGRAM AND THROUGH OTHER PROGRAMS IN
SUCH FIELDS AS TOURISM AND RECREATION, TRANSPORT, EDUCATION,
AND SOCIAL WELFARE. ABOUT THREE QUARTERS OF THE FUNDS
ALLOCATED UNDER THE REDS PROGRAM HAS GONE TO LOCAL GOVERNMENT.
THE CONDITIONS OF FINANCIAL STRINGENCY THAT ITE FACE
TODAY ALLOW LITTLE ROOM FOR FURTHER INCREASE IN THE AUSTRALIAN
GOVERNMENT'S ASSISTANCE TO LOCAL GOVERNMENT. CERTAINLY, THERE
COULD BE NO MOVE FROM RELIANCE BY LOCAL GOVERNMENT ON LOCAL RATES
AS A PRIME SOURCE OF REVENUE AND AS A REGULATOR OF DEMAND FORSERVICES
CONCLUSION THE PLACE OF LOCAL GOVERNMENT OF COURSE IS IMPORTANT
TO OUR CONCEPTS OF REGIONALISM AND CO-OPERATIVE PLANNING.
WE SEE REGIONALISM AND CO-OPERATIVE PLANNING, TOGETHER,
RATIONALISING THE ALLOCATION OF RESOURCES BETWEEN THE AUSTRALIAN
AND STATE GOVERNMENTS. THEY WOULD OVERCOME MANY OF THE CONCERNS
THAT YOUR OFFICIALS HAVE EXPRESSED ABOUT CONDITIONS ATTACHING
TO SPECIFIC PURPOSE PAYMENTS. THEY WOULD DECENTRALISE DECISIONMAKING
TO THE APPROPRIATE LEVEL.
S THE POSITION MY GOVERNM'ENT HAS ADOPTED IS NEITHER NOVEL
NOR UJNIQUE. PROFESSOR RUSSELL MATHEWS, THE DIRECTOR OF THE CENTRE
FOR RESEARCH ON FEDERAL FINANCIAL RELATIONS IN HIS 1974 REPORT
POINTED TO THE NEED FOR AUSTRALIAN AND STATE GOVERNMENTS TO RECOGNISE
THEIR INTERDEPENDENCE AND TO DEVISE EFFECTIVE MEANS OF CO-ORDINATING
THEIR DECISION-MAKING PROCESSES.
WE SHOULD SEEK, FOR THE LONGER TERM, ARRANGEMENTS THAT WILL
COPE WITH CHANGING CIRCUMSTANCES AND CHANGING PRIORITIES AND WILL
ENABLE THE ALLOCATION OF RESOURCES RAISED FROM THE AUSTRALIAN
TAX-PAYER TO BE MADE ON THE BASIS OF THE NEEDS AND PRIORITIES OF
ALL AUSTRALIANS.