PRIME MINISTER
FOR PRESS OCTOBER 27, 1976
ADDRESS AT THE HOBART PRESS CLUB
From time to time, it is useful to set the daily rush of
events into perspective to review the ground we have
covered and what lies ahead.
I would like to take this opportunity to talk about the national
perspective which has guided the government-in its policies
this year and which marks out our future course.
There is increasing evidence still early and tentative to be
sure that the fight against inflation is being won.
That fight is still a long way from being over, but we can
take heart from the signs of progress, which are now emerging.
The gains that have been made have been hard won, and we must
not. throw them away. Inflation is the greatest single threat
to jobs, to savings, to the young, to the ret * ired, to the poor.
It is the greatest single threat to individual security.
Until it is under control it will remain a threat to our
national future.
That is why, throughout this year, we have given top priority
to the attack on inflation so many of the other objectives
we all have for ourselves, and for Australia, depend on success
in that.
The successes so far achieved have been won through the
restraint of all sections of the community. Government has
lowered its demands so that resources can be freed to the productive
private sector. I believe there has developed widespread
appreciation among the great majority of wage and salary
earners, and rank and file trade union members, that by
restraining wage demands costs can be contained and more jobs
createAI. Such restraint is frustrating in the short term but it is the
best possible guarantee that real growth in production will
take place so that real wages will start rising again.
A new wages spiral such as the one provoked by the Labor
Party during its term of office will ensure that inflation
will revive and consequently unemployment will remain high,
recovery will be delayed and uncertainty and insecurity will
continue. / 12
This restraint has made possible the introduction'* of full
personal tax indexation.
This year, the tax reduction under-indexation for a taxpayer
with dependent spouse on average weekly earnings i * s $ 4.60 per week.
Next year, tax indexation will mean a further reduction in tax
compared to 1975/ 76 rates. Just how much will depend on the
rate of inflation.
At 12% inflation next year, the saving for this same taxpayer
would be a further $ 3.96 per week compared with tis year, and
$ 10.60 per week compared with the 1975/ 76 rates. At 6% inflation,
the taxpayer with a dependent spouse on average weekly earnings,
would be paying $ 7.50 per week less than if 1975/ 76 rates still
applied.
This year personal tax indexation is worth $ 990 million to
Australian taxpayers. By next year taxation revenue will be
some $ 2 billion less as a result of indexation adjustments.
It is an important aspect of our total attack on inflation.
In setting this year in perspective it is very import ant that
we understand why Australia has suffered so high a rate of
inflation and why unemployment is so high.
The fundamental reason was a particular approach to the role of
government in our society. The nation's leaders know or
ought to know that at any * one time the wealth of Australians is
liptited if more is spent in one direction, less is
available to spend in another.
What happened in the year 1972-1975 was that this basic reality
was ignored. There was a-massive transfer of control over
national production to the government. In one year federal
government spending increased its share of gross domestic product from
24 to 30 percent. At the same time the government encouraged
massive wage claims among those organised into strong unions.
The Whitlam Labor Party encouraged grossly exaggerated
expectations about what government could do, failing to tell the
country about all the hidden costs which have now become apparent.
All that money the Labor Party collected in ever higher taxes
had to come from somewhere all that money that went into
excessi've wage claims had to come from somewhere. It came out
of the savings of the retired; it came from those on fixed
incomes, those not organised into strong unions; it came
as the poverty report points out by depressing further the
condition of the poor; and finally it -came from the earnings-of---
private enterprise which were needed to provide jobs.
At the end of Labor's term in office, despite large increases.. n
the number of people looking for jobs, there were no more jobs
in private enterprise than there had been three years before.
Inflation, in part through the above mechanisms, had
destroyed job opportunities.
Perhaps the most shocking aspect of this experience is that there
were not more vigorous protests about what was happening
at the time. 3
How could this happen? I suggest the reason was that -over
the years we in Australia and people in other western
countries as well had lost sight of some basic realities
about government and our way of life. We began-to take it
for granted that the-economy would keep on Producing
more and more, regardless of what anyone did two decades
of prosperity made it seem as if growth would go on forever.
After years of slowly rising government spending too many
began to assume that the way to solve all-problems was
simply to increase government spending a bit more it
didn't seem credible that more government spending could
actually be counter productive. The further idea grew
up that any worthwhile activity was enctitled to support out of
public funds, and that public funds were so vast that it wasn't
necessary any longer to set priorities.
The result was a do ubling of the size of the federal budget in
three years, a huge increase in the number of people employed
by government, a tax burden which increased by 20% on t he
person--on average earnings, an economy producing less rather
than more, and an increase in unemployment of 180,00* 0 in one year.
An economy which has historically coped better than av erage with
inflation, turned in'one of the worst performances of any
industrial country., Certainly there-was world wide inflation
but since the Second World War the changing structure
of the Australian economy had improved Australia's capacityto
absorb overseas economic fluciuations without large domestic
effects. Our export base had broadened; unlike most OECD countries
we were spared any significant direct impact from the large
rise in oil prices overseas.
Inappropriate domestic policies were the princip al cause of
the economic setback we suffered.* Moreover, it became very
obvious' that government couldn't keep growing bigger without also
becoming more powerful. Power became more and more centralised
in Canberra. As government took an ever-increasing proportion
of people's earnings, people began to realise th * ey were gradually
losing control over their lives and becoming more and more
dependent on what politicians chose to provide.
Throughout the western world there has-been a fundamental
reappraisal of the course that has been taken. The path of
rising taxation, expanding bureaucracy growing regulation and
centralisation of power is no longer seen as the path to a
better life it is more clearly seen now for what it is: the path
to a 1984 kind of society.
it is widely recognised now that government spertding which
becomes too high too rapidly, simply feeds inflation and unemploymentmore
spending makes the problem worse, not better.
Virtually all major countries have now proposed reductions in
the rate of growth of central government spending between their
last fiscal year and their present one. In the United Kingdom
from 28 to 17%; in Canada from 19 to 13%; in Germany from 19 to 4%;
in New Zealand from 29 to in the United States from 13 to 11%;
and in Australia. . from 23 to 11%. As I said earlier there are now
clear signs that this strategy iSworking.
But beyond the present crisis there are * some fund . am. ental
questions we need to answer as a nation. We cannot
simply take up once again, the attitudes we held * before
this crisis.-because those attitudes the ones* I have
mentioned were sf'gnificantly responsible for the problems
we now face.
Take the attitude I mentioned towards government spending.
In recent years, government has been able to spend on many
things because inflation brought a vast unlegislated windfall
to revenue. Inflation produced hidden tax increases each
year which ' helped supply the funds for these programmes.
It is just not possible to keep increasing the tax burden
without significantly affecting incentives and expectations
and policies based on the assumption that taxes can be raised
indefinitely must fail.
The approach we have seen in recent years is not a viable approach
for the longer term. Indeed, taken to the extremes of the last
few years, it is not even a viable approach in the short term.
It is the easiest thing in the world for a politicians to promise
some great new scheme of-government spending.
No such promise can be made which does not have to be paid for
by the work and effort ' of the Australian people. It is time
we looked with scorn at the politician who promises expensive
panaceas for all our national,-problems who acts as if
government revenue were manna from heaven rather than the product
of labour and effort.
Every promise to spend must be backed by the energy, the initiative,
the capacity to create of the Australian people. The politician
produces nothing himself he relies on the work, the product
of others.
In the end our standard of living as well as our capacity to
introduce new government programmes, depends on how much., we
produce ourselves, by our own efforts on how hard and how well
we are prepared to work. Japan has few natural resources she
imports her coal, her iron ore, much of her food. Yet
the Japanese people have guild their nation into one of the most
prosperous in the world.
Australia has great natural resources massive reserves of
coal,, iron and ' other minerals; huge areas of fertile land
for primary production. We perhaps need to ask ourselves where
we would be without these resources what our stand of living would
be what our capacity to help poorer countries would be.
The only way we can pay for major new social programmes, to
help those in real need at home and abroad, is to produce more.
Producing more doesn't necessarily mean working harder.
It means working better, more effectively; it means
improved organisation better relations, between-labour and management;
it means better use of equipment, better training.
If our national production had grown in the last two years
at the average rate of the previous decade, our G. D. P. would
be $ 3,000 billion larger in real terms than it was-in that year.
We would be that much more able to offer assistance than we are
now. Since our wealth as a people tends to rise in real
terms by an average of about 5% per year, this is the limit of
viable average increases in Government spending-. If we want
Government to spend more without inflation, we have to produce
more. This requires a much more reasonable set of expectations than
some have evidenced in recent times. It is not the Australian
people who have been unreasonable, but politicians politicians
who have either not understood the consequences of their own
actions or have deliberately misled the Australian people about
what they the politicians could provide.
Moreover, we should certainly not take it for granted that in any
year a real increase in government spending is desirable.
There are clearly occasions when it is desirable to hold the
real value of government spending constant, or even reduce it so
that reductions in taxation can be made.
We must not allow ourselves to get into the situation where
taxes can only be increased never reduced.
It will always be possible to point to problems where more
government spending could help. What needs to be kept much more
clearly in--view than in the past is that people tend to know
their own needs much more clearly than government ever can.
Proposals for more government spending have to be measures
against their impact on the independent capacity of people to meet
their own needs most effectively.
A willingness to make vast promises is not a mark of social
responsibility. It can be most irresponsible if the cost is
a further erosion of people-Is capacity to meet their own needs
in the way they think best.
Personal independence or autonomy is not something to be taken
lightly. It is one of the most-important foundations of selfrespect
and at a social level, it ensures that people are able
to give effect to their real priorities and not priorities which
a few politicians determine for them.
This point was made very strongly by the proverty report.
It said: " An adequate income is fundamental to a person's security,
/ well being and independence. It enables him to
provide housing, education, food transport aid other
essentials for himself and his family.
An adequate income allows him freedom of choice and freedom
to participate in activities of his choice."
Government spending which is too high erodes freedom, independence
and security. As we have seen only too clearly, people do not
necessarily become or feel more secure simply because
government is spending more. ./ 6
Thatis why, for example, in the welfare area we are stressing
reforms which are-aimed to help those in need with'the
independence and opportunities those on higher incomes have long
enjoyed. This is. in accordance with the principles of,
the poverty report, but quite contrary to the Labor Party
approach which emphasises vast costly universal schemes
which inevitably mean'less for thos-e in real need.
The radical family allowances scheme we introduced.
earlier this year -:. one of the most important welfare reforms
since federation shifted assistance to families towards those
in most need..
Over 300,000 families and 800,000 children who were debarred
wholly or partly from benefiting from the rebate system, are
now being assisted by the family allowance.'
The family allowance scheme does not add to bureaucratic
overheads, and it places money in the hands of people. It does
not increase their dependence on the government, but lets
people make their own chuices about what their needs are and
how best to meet them. It is a scheme which both assists
the disadvantaged and increases their independence'.
The same approach underlies the housing allowance voucher
experiment-we have initiated. As the Treasurer said in
his budget speech: " Should the experiment prove successful,
implementation of suchia programme would
give low income families the financial means
to select their own rental accommodation
on the open market.
It would provide a new mechanism to make
welfare housing sensitive to the needs of the
users. It takes into account the view of the Commission
of Inquiry into Poverty.
Protecting the security of individual income against ever
rising government spending requires that we continue our
concern with teh scope, structure, and efficiency of the
government sector.
This year we have set the course by a number of major measures.
We have reduced the size of the Federal Public Service
significantly, and will be continuing this policy through this
next year. Under guidelines now established the Federal Public
Service by June next year will be thousands lower still than the
levels projected under the Labor guidelines for 1975-76.
As you will be aware, we have also begun a major decentralisation
of government power and functions through the Federalism reforms.
Hobart, of course, has an-important place in these reforms as
the location of the Advisory Council for Inter-Government
Relations. 7
. Working under the Premiers' Conference the Council-is
expected to make through its studies a valuable contribution
to the efficient operation of Government in Australia.
The Federalism policy reflects'an entirely different attitude
to the important reg'ions of Australia. It ' is an historic
reversal of the trend towards centralism. A recognition
that Australia cannot be a strong and prosperous country is
its regions are neglected.
Before the election last year, we made'a number of firm commitments
to help the development of Tasmania.
Those commitments have been honoured. We undertook to introduce
full freight equilisation for Tasmania in the light of the
Nimmo Report. The scheme we announced and which has been
in operation since 1 July this year goes beyond the Nimmo
recommendations. The-new federal financial arrangements will
bring some $ 4.7 million more to Tasmania than the old scheme.
We have been very much aware of the needs of Hobart following
the bridge disaster. So far some $ 24 million has been spent by the
Commonwealth as a result of the disaster. Very substantial
assistance will be made available this year as well.
The Commonwealth is also assisting in the establishment of the
South West National Park through the provision of funds and
through the Australian National Parks and Wildlife. Service.
More important, our reforms will greatly assist Tasmania to
meet its needs in the way Tasmanians think best. Australia
this year, has set out on a new and exiting course.
We have a remarkable opportunity in Australia to try a new
approach to many problems. Austral-ia is a country with certain
unique characteristics. Incomes are more equally distributed
in Australia than in almost any country in the world.
Australians, on the whole do deal with each other un a basis of
mutual respect. Australia has never suf ' fered the exploitation
of more unequal socieites. Australiansmare move educated, better
informed than ever before.
This is a nation pre-eminently suited to the ip. telligen . t exercise
of freedom and individual choice.
But restoring prosperity to Australia, enabling Australia to play
the role in the world we would like her to. play, depends
ultimately on what we as individuals are prepa.,-d to do.
Our own efforts are going to be the main determinant of the kind of
Australia we create. If we develop the attitude of trying to
get is must as possible for as small a contribution as possible,
Australia is never going to become the great country we
know it can be. Such an attitude is neither socially responsible
nor in our own interests as a people. We cannot evade our
responsibilities by trying to leave it to the Government.
Governments alone cannot promise security security for the
elderly, the sick, the poor, those without jobs. Security must
be backed by the productive wealth of the nation. Untimately
the security of all Australians depends on what all of us do.
Any Government, any political party which fails to make that
8.
plain is misleading the nation and evading its responsibilites.
Socially responsible action in these circumstances action
which builds a strong basis for individuals security is
action directed to helping us work more effectively.
That is reality. We have to fact up to it.
I am confident that most Australians are well aware of this.
It will be their efforts, in the end, that will make Australia
a stronger and more compassionate society than it has
ever been before. 000oo00000