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Tuesday, 23 April 1985
Page: 1357

Senator COLLARD —I refer the Minister for Finance to the Prime Minister's Press conference yesterday, at which he said:

Of course the other thing which has affected the forward estimates is the whole volatility of the currency.

Will the Minister advise the Senate what effect the volatility of the currency has had on the forward estimates of expenditure? How much has this volatility added to the cost of continuing 1984-85 policies into 1985-86?

Senator WALSH —There are a number of rather technical terms and somewhat arbitrary variants of technical terms used in talking about this subject. Forward estimates and adjusted forward estimates are somewhat arbitrary terms. A forward estimate, according to some definitions, is an estimate of expenditure under programs for which there is no continuing legislative backing. Those forward estimates are then sometimes, and I would expect always, adjusted. A judgment is made about programs which do not have continuing legislative backing and some allowance is made for those in the forward estimates.

This year, for example, there is no continuing legislative requirement for the Commonwealth to pay any share of Commonwealth taxation receipts to the States. I must say that sometimes that is a tempting option. There was an expectation, which was accepted, that, of course, there would have to be significant continuing Commonwealth payments to the States, even though there was no continuing legislative requirement to do so.

I am not sure of the context in which the Prime Minister said that. The definition of a forward estimate, about which the Prime Minister, a number of other people and I have been talking for the last couple of months, is that, broadly speaking, there are programs for which there is a continuing legislative requirement and programs for which it is deemed, somewhat arbitrarily, that there is a practically inescapable requirement, such as the one I have cited.

The devaluation of the currency has made a significant difference, or it would if those forward estimates were to be updated. I expect that the point the Prime Minister was making-I will check with him later-was that, because of devaluation, the cost of government purchases overseas has risen substantially since the forward estimates were prepared because they were prepared on a different exchange rate. I am not sure what the exchange rate was but it would have been something above 80c. That is certainly not applicable at present and it may or may not be applicable in the future. A reassessment of those estimates based on today's exchange rates obviously leads to a very significant increase in the Australian dollar cost of items which are purchased overseas, principally defence equipment. I expect that it was in that context that the Prime Minister made that comment.