PRRMEF MNISTER
FOR MEDIA 29 MAY 1979
STATEMENT TO THE PARLIAMENT
The package introduced by the Treasurer last week was one of
economic responsibility. It puts the economic health of
Australia and the well-being of all Australians wherever*
they may be, whatever their occupations may be, foremost in
the Government's mind.
The Government's commitment to responsibility is critical to
economic recovery. Because of our policies inflation has been
substantially reduced. The competitiveness of Australian
industry has greatly improved. New private fixed capital
expenditure is up 26 percent in the year to March 1979. In
mining capital investment is particularly strong 46 percent
up in the year to March of this year and the mining industry
expects a further 32 percent throughout the course of 1979.
oil exploration and development are taking off. The rural
economy is having its best period for a very long while,
making up for some of the very lean and difficult times it
has had over recent years. Business profits are rising.
Private civilian employees, seasonally adjusted, have risen
for seven months and that's the best result since 1974.
Retail sales for the March quarter were up significantly.
The Treasurer's package continues the thrust of economic
responsibility. It consolidates the gains that we have made
over three and a half years. It will strengthen confidence
in the Australian economy strengthen control over our own
expenditure. There will be substantial savings in health,
in education, in payments to primary industry and transport
and in other areas. These expenditure reductions show the
determination of the Government to control its own expenditure
and they also foreshadow stringent control at the Premier' s
Conference in June and at the Budget in August.
The fLull year savings and the forward estimates and the new
policies-~ for the programme-s already-announced include $ 290 million
or a LYittle more in health, and over $ 60 million in primary industry.
Further savings in other portfolios can clearly be expected.
The Government's record of expenditure control is clearly shown
by the fact that today's deficit as a percentage of Gross
Domestic Product is significantly less than it was under the
Labor government. / 2
-2
The Government has also acted to raise further revenue.
OPEC induced price increases will be reserved for the community
and not for companies. New oil to be discovered will be
unaffected and therefore exploration incentives will be
maintained. The coal export levy at the reduced rate will be
continued. The trading stock valuation adjustment, applied by
firms to increase after-tax profits rather than to adjust their
internal stocktaking accounts, and therefore being used in a way
not foreshadowed by Mathews is being removed. of course, the
liquidity position of companies is infinitely better than it was
when the adjustment was first allowed. So in many senses it
has achieved a real purpose.
The carry forward of paper losses under tax avoidance schemes which
Labor did nothing to prevent is not going to be allowed, and
of course we are extending the existing PAYE schedules to
November 1979 or to some earlier date to be proclaimed. That
plainly means that there is no change in current PAYE rates
and no change in current weekly deductions.
One of the deceits of the Australian Labor Party is that they
sought to have people believe that there is going to be a tax
increase from the 1st of July. A tax increase of course was
never in mind. It's a question of whether tax reductions
foreshadowed at the time of the earlier budget could in fact
be consummated.
Personal tax rates for the whole of 1979-80 together with a
decision on indexation will be announced at the same time as the
Budget. I would like to emphasise what the Treasurer said.
There is no prospect of removal in full of the surcharge together
with full implementation of tax indexation when that announcement
is made. And the final decisio * n will not be possible until we
have the complete information available to us at the time of
the Budget.
The package introduced by the Treasurer is balanced and is
equitable both on the expenditure side of the account and on
revenue. It protects those in need. The health changes will
continue to protect pensioners and the socially disadvantaged
and will establish the circumstance where people can pay the
small bills for themselves but be protected against the major
accounts that cancompletely break the individual or any family.
And I indicated earlier that if there was a virtue in regular
Medibank I as opposed to the programme that had been introduced
or maintained earlier, it was that the original Medibank scheme
together with the changes that have been introduced since,
established universal health cover for all Australians.
I suggest that the price paid for that was a high one by the
Australian community as a whole. But it's worth noting that
we have preserved that universal health cover for all
Australians with changes now introduced. ./ 3
-4
The 4 percent wage decision was more than hoped for by the
Government. At the same time inflation in a number of
countries is running much higher. In the six months to
March of 1979, inflation is running at an annual rate of
10.1 percent in the United States, 10.7 percent in the United
Kingdom, 10.5 percent in Canada, 15.4 percent in Italy,
10.1 percent in New Zealand. Even in Germany, which has
a very good anti-inflationary record, the inflation rate has
about doubled during this year. All of these figures show
that inflation prospects in many countries are much less
favourable than in Australia.
Many of these factors, especially prospects for the rural
community and miners have healthy effects on the economy,
but they also have an impact on inflationary pressures they
have an impact on the money supply. And, as a result of these
changes, inflationary pressures increase and there is a clear need
for Government action to maintain control over the economy.
Particularly so since the 5 percent inflation forecast in
Budget Statement No. 2 will not be obtained.
Before last week's package the Government had already acted
to adjust interest rates to changed circumstances; to introduce
changed methods of financing the wheat crop; and to make
calls on SRDs. These actions alone were not enough. They had
to be strengthened by further actions if undue strain was not
to be placed on monetary policy.
In the total picture of economic recovery with its consequent
inflationary threats, a lower deficit is all the more
important. The Budget must give total confidence so that
there will be a downward pressure on prices on inflation. In all
these circumstances a tax cut of over $ 1,000 million on
1 July would have been irresponsible and would have destroyed
that confidence.
The Government plainly is disappointed that it has not been
possible to remove the surcharge immediately, as forecast at
the time of the last Budget. But I must say unequivocally that
our anticipations proved to be wrong by later events.
That's a cross that the Government must bear. We regret the
fact that we are unable to remove immediately the surcharge
and introduce tax indexation. We certainly make no apology
for it, because we have taken the right course for the economy
and for the people of Australia.
The step we have taken will build confidence in the Australian
economy and there should now be no pre-Budget doubts about the
Goverpment's resolve. There will be no pre-Budget doubts
about investment decisions; about the value of the
Australian . dollar and about the growing confidence throughout
all sections of the Australian community.
3-
The package brought forward by the Treasurer responds to
improved business and rural conditions. We provided help to
rural industry when it greatly needed it and if the same
circumstances arise again we will certainly do so again.
For example, there was special beef assistance for the beef
industry in 1977-78 but quite plainly that special assistance
is not required under the current circumstances.
In addition, the stock valuation adjustment followed the
liquidity difficulties that many industries and companies were
experiencing at earlier times. Today business liquidity has
greatly improved.
We make no bones about the fact that the last Budget committed
the Government to taking off the surcharge. That commitment as I
have made plain, as the Treasurer has made plain, was made in
good faith. But after tightening expenditures and raising
more revenue it was clear that the only responsible course
was to keep open options on tax indexation and on the
surcharge until the Budget in August.
I stress that * this does not involve any increase in weekly PAYE
instalment' deductions on41 July. It was never a question
of an increase over and above current rates. It was a question
of the possibility of a decrease. There will be no change
in take-home pay as a result of the decisions that the
Treasurer announced.
Many figures in the Budget are predictions; based on the best
advice and knowledge at the time. The forecasts for the
1978-79 Budget were in the context of two years of falling
inflation and of falling monetary growth.
Certain Budget forecasts are critical, but if they do not
eventuate the Government has no responsible option but to
compensate by other Government action. And since the Budget
a number of things have happened which put some of the Budget
perspectives out. The economy is not static it is not
fixed by words in a Budget. It's a living thing affected
by the actions of changes within and without Australia.
And much has changed since the Budget. I mentioned before
the deteriorating strategic situation in Iran and Indochina.
That was not foreseen by anyone. Accordingly this Government
has properly made decisions to spend more in real terms on
defence. oil prices have increased because of Iran, more than anticipated
at the time of the Budget. There is therefore a greater push
for im,, flationary expectations. Beef price increases are 35 percent
higher than the Bureau of Agricultural Economics forecast at
the time of the' Budget. The Wheat harvest is more than 50 percent
above last August's forecasts. There has been a dramatic
improvement in some commodity prices in this financial year
aluminium over 20 percent, copper over 30 percent, lead over
100 percent and zinc, over 40 percent. Moreover for the
second successive year, estimates of revenue in the Budget
appear likely to exceed the revenue outcome. / 4
The Government is determined to take the right course. We
will respond to chanqes and to influences as they arise and
will change policy as necessary.
The package that was introduced by the Treasurer is a mark
of strength and determination to act in the interests of all
Australians. It is the mark of a determination to respond to
new conditions that arise either here or overseas.
The judgement of the Australian people will go far beyond
the petty actions of the Opposition in this Parliament because
the package will be respected. It takes the right course for
Australia as a document of economic responsibility.
The Government will not sacrifice economic management for
political expediency. We will keep fighting inflation. We
will keep fostering economic activity that will provide
lasting jobs; will keep taxes at the lowest poss รต ible level.
It's been a long fight to strengthen the Australian economy.
and to achieve our goals. We never disguised this. And we
never have.
But now there is an upturn in the Australian economy and
recovery is under way and that's not doubted except by the
blind men of the Australian Labor Party.
The vision that brought this Government to office has not
been dulled. That vision keeps us on our path and gives us
the courage to respond to reality effectively and in the
interests of Australia.
Under Labor the Government deliberately and constantly raised
false expectations. It bred a greater dependence by people
on the Government. Labor destroyed the capacity of Australian
industries to employ. They destroyed the independence of
people by breeding the view that the Government only had to
be asked and it would provide. They established the philosophy
that Governments have unlimited resources because they could
go to the printing press and that Governments have to provide
the answers to all problems. They established the false view
that people could be paid according to their own estimates of
themselves. They set about destroying Australia by creating
a web of deception by deluding Australians that living from
tax dollars without contributing to Australia does not hurt
f Ilow Australians.
Labor tried to put Australia on the path that throughout history
has taken once strong and vibrant nations to their very
destr'uction. But Labor failed. Their philosophy was
overwhelmingly rejected by the Australian public in two elections.
The task of this Government has been to rebuild the strength and
the independence of this nation: to reassert the fundamental
principle that Governments can establish the circumstances,
the opportunities for people to achieve and create and that
ultimately it's only an independent, self-reliant society
that can develop Australia. ./ 6
-6
We've been working to establish the circumstances in which
Commonwealth and State Governments live within their means;
the circumstancesin which Australian industries will
once again be independent, excell in the Australian market,
move out into export markets and employ more people.
We've been working to establish the circumstances in which
people can be self-reliant; the circumstances in which the
weak and the poor can be protected; where families are
protected when illness strikes and which they can't be expected
to cope with from their own resources.
We've been working to strengthen the life, the vitality, the
vigour of the Australian people.
That's what we've been working to. And that is what we have
been achieving.
We have a vision of a Liberal society of free, independent
people with a pride in being able to do things for themselvesan
Australia of growing strength, unequalled as a place to
bring up a family; unequalled in freedom and unequalled in
opportunity. A nation creating our own distinctive culture,
our own identity out of the culture and history that so many
people have brought to us from so many different lands.
This can only be achieved by a Government that established
the circumstances which enable individuals and businesses to work
out their own future in their own way. A Government which
recognises that it should not seek to do for people what they
ought properly to do for themselves.
The Australian Labor Party sought to destroy the initiative
of Australians. The inflation created by Labor undermined
industrihs; the inflation created by Labor degraded individuals;
it weakened the old and harmed the weak, more than anyone
else in the community.
Repairing the damage of Labor was a great task but we are well
along that road and we are doing this by facing up to economic
realities and by not allowing expediencies to determine our action.
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