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Tuesday, 24 February 1987
Page: 573

Mr GRIFFITHS —Will the Treasurer inform the House of actions that the Government is taking to ensure that Australia has a fiscal policy appropriate for our current trading difficulties?

Mr KEATING —Today, I announce, on behalf of the Government, the Government's intention to make a statement to Parliament in May of expenditure saving measures anticipating cuts in outlays beginning 1 July in the next financial or budgetary year, 1987-88. The point of a May statement, which the Government has used now on two previous occasions, is to effect savings not just from Budget night but for the full 12 months, and also to indicate to the country at large and to markets in particular that the Government intends to maintain the discipline over fiscal policy, which it has had now for four years, to adjust Australia to the sharp fall in its terms of trade and the prices for its exports, so that we are no longer in a position where we are relying on overseas savings, over the long term, to prop up our living standards because we have failed to increase our own savings for productive investment in the import-competing and exporting sectors.

The Government believes that the deficits have needed to be cut. When we came to office the deficit was 4.8 per cent of gross domestic product in prospect. The Government brought it in to, I think, 4.5 or 4.6 per cent. This year the deficit in prospect is forecast to be 1.4 per cent of GDP. As Australia moves through this process of adjustment to its terms of trade decline it is not in a position to be paying for its imports and balancing its payments to a very consider- able degree, in fact of the order of $14 1/2 billion. A continuing grip upon fiscal policy, along with the other instruments of policy, is entirely necessary.

Again I contrast the mechanisms of the Government and the announcement of a further process of discipline on the fiscal side with the kind of lack of discipline which would come from the adoption of the Opposition's policies on taxation, which would add $14 billion unless the deficits are changed. Of course we know what the impact of that would be; it would simply smash Australia's credibility on financial markets. The cost of funding our current account would rocket to the high 20 or 30 per cents as Australia was crushed into a domestic recession. I contrast for the House and the public the difference between a government that believes that the difficult process of adjustment must continue and be undertaken and an Opposition that believes that at a time when our national income is being cut we can have some cosmetic increase in living standards by some fistful of dollars. We will let the public be the judge of where the truth and honesty lie in the economic policies of the various parties. However, I say again that this Government is committed to the kinds of disciplines it has now had in place for four years and the announcement of an expenditure statement in May is just another step on the road to the introduction of another Budget which will maintain that discipline and that process of adjustment.