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Monday, 20 May 1985
Page: 2164


Senator MAGUIRE(4.38) —I rise to speak on Appropriation Bill (No. 3) and Appropriation Bill (No. 4) which are before the Parliament. Appropriation Bill (No. 3) provides for the allocation of $426m from the Consolidated Revenue Fund for additional expenditure by the Government. Appropriation Bill (No. 4) allocates another $138m for the additional needs of the Government. The total amount of money involved in the two Bills is $564m. That money is in addition to that voted by Parliament last year after the August Budget for the current financial year, 1984-85. In the sum of $564m which is allocated in these two Bills extra amounts of money are provided for price increases, and staffing changes in the Public Service. There is an extra $42m for wages and salaries and $249m for extra needs by the Defence Department. Appropriation Bill (No. 4) provides for expenditure on capital works by the Commonwealth Government and on services. It also provides for payment to or for the State governments. One of the allocations within the Bills we are examining today is an extra $62m for Medicare grant payments to the States for their public hospitals. Some of the items in the legislation have already been offset by savings in respect of items in the August Budget. I understand that savings have been made totalling $198m, compared with the original Estimates, so today we are really looking at a net increase in appropriations of $366m. That has to be kept in perspective in relation to overall Commonwealth Government activity, where outlays now total some $60,000m to $65,000m annually.

I turn to look briefly at the tremendous improvement in the economy under the present Government. Under the Hawke Labor Government, Australia has witnessed one of the strongest non-inflationary economic recoveries ever. It is worth examining the extent of this economic recovery across a range of economic indicators. In the 24 months from April 1983, when the economic summit was held, to April this year, some 308,000 more Australians have found work in the public and private sectors of the economy. I emphasise that the great majority of that employment increase was in the private sector of the economy, not in the public sector of the economy. Tens of thousands more Australians are at work in the private sector of this economy as a result of the policies of the present Government. The Government's commitment to increase employment by half a million in its first three years of office remains on track.

I find it almost unbelievable to listen to speeches similar to that made by Senator Peter Rae this afternoon. Opposition senators, with their appalling record of stewardship of this country's economy, have continued to criticise the economic performance of the Labor Government. The interesting thing is that after just 24 months of Labor Government, according to labour force figures issued by the Australian Bureau of Statistics, the increase in the number of Australians working is almost as large as the total number of new jobs created in this country in the entire 88 months of the Fraser-Howard Administration. We have a tremendous difference in the record of the two governments. Over the last 24 months the increase in the number of Australians at work achieved under this Government almost rivals the entire number of jobs created in the 88 months of the Fraser-Howard Government.

As a result of the growth in employment, there has been a substantial reduction in the level of unemployment in this country, and a welcome reduction indeed in the tragic level of unemployment which was left by the Fraser-Howard Administration for this Government to deal with. I refer again to the figures for April 1983, when the economic summit was held, and April 1985. In the period between those two years the number of unemployed persons in Australia declined by almost 100,000-a tremendous reduction and one that gives new hope to the many unemployed people in Australia. Unemployment remains at an unacceptable level, but under the Hawke Government there has been a reduction of between 99,000 and 100,000 in the nation's jobless total. That is in stark contrast to the situation under the Fraser-Howard Administration, when we saw such a huge rise in unemployment.

In the period of office of the Hawke Government the inflation rate has been reduced markedly. We heard much rhetoric in the 1970s about fighting inflation first and the evils of double digit inflation. Many sacrifices were called for from the community by the Fraser-Howard Administration, to fight inflation first, as they put it, but when we came to office we found that inflation was running at an annual rate of 11 1/2 per cent. That was clearly a double digit rate and one which was unacceptably high. That was clearly a poor legacy to the community by those who would have us believe that they were fighting inflation first. Under the present Government inflation has been reduced from 11 1/2 per cent to between 5 1/2 and 6 per cent-more than halved in the period of office of the Hawke Government.

The real improvement is to be seen in real economic growth. When we look at growth in the non-farm sector of the economy, which can be influenced by economic policy-it is very hard to influence the seasons and, therefore, the output of the rural sector-we see that in the last full calendar year of the Fraser-Howard Administration Australia managed only 0.9 of one per cent real economic growth. That is a disastrous record, when one looks back and considers the tremendous advantages this country has had-the natural resources endowment, the skill levels of the community and the highly trained labour force. By world standards, 0.9 of one per cent real economic growth in this country is a tremendously poor result, and that is what that Administration achieved.

In 1983 non-farm economic growth increased by 2.6 per cent. In 1984 real economic growth was at a level in excess of 5 per cent, which is a quite respectable level of economic growth by world standards and certainly a major improvement on the slumped and faltering economy of the Liberals as a result of their stop-go economic policies.


Senator Peter Rae —Try comparing it with 1978-79, if you want a real comparison.


Senator MAGUIRE —We are now experiencing 5.1 per cent real economic growth in the non-farm sector of Australia. Of course, Senator Peter Rae and his colleagues would have the community forget that through the financial year 1983-84 Australia experienced the highest real growth in gross domestic product of all the developed countries. From June 1983 to June 1984 this country experienced double digit economic growth, growth in excess of 10 per cent; something the Fraser Government could not achieve in economic growth. Regrettably, it did achieve double digit inflation, and that is one contrast that can be made between the performance of the two governments.

Recent indicators of consumer spending and private investment reveal that the growth in those sectors is continuing strongly and is spreading throughout the private sector. This is reflected in the recent pick-up in the motor vehicle registrations, retail sales and the demand for housing. It is clearly a very broad-based economic recovery spreading over major sectors of the economy. I was pleased to hear the information made available today by the Minister for Finance, Senator Walsh, that retail sales in this country are now growing strongly. The Minister instanced a growth of 3 per cent in real terms. Under the Fraser Government I would be very surprised if retail sales ever achieved 3 per cent real growth, but it is very pleasing indeed to see the economic recovery in this country broadening out and encompassing major sectors of employment.

One of the great achievements under this Government is the huge reduction in the level of industrial disputation in the community. The number of days lost as a result of industrial disputes in the calendar year 1984 was the lowest in one and a half decades. That is certainly a tremendous improvement over the situation which prevailed under the previous Government. The number of days lost due to industrial disputes in the 12 months to the end of January this year was some 15 per cent below that in the corresponding period to January 1984. That is a very big reduction. The level of industrial disputation has fallen dramatically under the Labor Government; days lost as a result of industrial disputes have fallen dramatically under the Labor Government; and disruption to economic activity as a result of industrial disputes has fallen dramatically under the Labor Government. Under the Liberals, they escalated. The contrast between the two administrations simply highlights the damaging effects of policies of industrial confrontation which some Liberals wish to practise even today in this country. Clearly, policies of industrial conciliation have a much greater effect than policies of confrontation.

Recent economic indicators lead to the conclusion that the Budget forecasts for domestic economic activity and employment in 1984-85 remain broadly on track, whilst consumption and investment spending could be even higher than expected. It is a tremendous plus to have the two major elements of economic expenditure referred to in the Budget actually appearing to be growing faster than was forecast in the Budget Speech. That is a tremendous source of confidence for continued growth throughout the current financial year and at least early into the next financial year. I believe that the income tax cuts introduced last November are now beginning to feed through, resulting in stronger consumer demand in the community. Income tax was cut by $7.60 a week, resulting in a rise in disposable income. That is one of the key reasons why retail sales are now starting to grow significantly in the economy.

It is undeniably clear that the economic recovery in Australia has been more rapid than it has been in most other countries. I believe that this growth cannot be explained away conveniently, as the Opposition would have the community believe, by such factors as the breaking of the drought or international economic expansion. On so many occasions we have heard members of the Opposition claim that somehow the 10 per cent increase in real economic growth that we have achieved in Australia, 1983-84, was related to the breaking of the drought or international economic expansion. It is important to recognise that Australia's economic growth and employment expansion have been achieved despite relatively low prices for rural and mineral products. That is a fact of life at the moment. The rural and mineral sectors are experiencing relatively low prices. Australia still has achieved very rapid economic growth as a result of factors other than the convenient reasons the Opposition puts forward such as the breaking of the drought or international economic effects.

One of the most important challenges facing the Commonwealth Government in the immediate future is the need to reduce the Budget deficit. I shall talk about this challenge in more detail. A Budget deficit must necessarily be funded by government borrowing, which in some circumstances can place upward pressure on interest rates. The major alternative to increased borrowing is higher taxation. As a result of the high level of borrowing by the Fraser-Howard Administration, the Australian public debt rose significantly between 1976 and 1983. I have figures which suggest that from the end of June 1976 to the end of June 1983 the public debt in this country escalated from $20,000m to $39,000m-almost doubling in the period of office of the Fraser-Howard Government. I should point out that some of that debt was in respect of borrowing by the State governments. But the significant increase occurred in the Commonwealth sector, and the total public debt during the period of office of the Fraser-Howard Administration grew from $20 billion to $39 billion-a tremendous increase.

As a result of that increase the annual interest cost to the budget of the Commonwealth of Australia has risen by $2,000m. So every year we are paying $2,000m extra in interest just to service the increased debt-not the total stock of debt-incurred under the Fraser-Howard Government. Put another way, during the Liberal Government's term the public debt doubled in dollar terms and the interest liability increased in real term by about 25 per cent. That is a very big increase. This suggests to me that the way to sum up the eight years of the Fraser-Howard Administration is to say that it ran the Commonwealth Government of this country on a buy now, pay later plan. During the 1970s and the early 1980s it financed its Budgets by running up a huge stock of debt.


Senator Button —The same as their heroine, Margaret Thatcher, is doing in England.


Senator MAGUIRE —Yes. I say to Senator Button that the previous Government's policy was very much an example of buy now, pay later. The unfortunate consequence of that policy is that the community is now being forced to pay the bill for the expenditure incurred in the late 1970s and early 1980s under the Fraser-Howard Administration.

The Hawke Government, in order to achieve its stated aim of reducing the deficit, has made a commitment to the so-called economic trilogy. The trilogy involves a commitment to reduce in money terms the deficit in the Commonwealth Budget in the next financial year, 1985-86, and to reduce the deficit as a proportion of gross domestic product over the three-year term of the current Parliament. The trilogy also involves a commitment not to increase Commonwealth tax revenue as a proportion of gross domestic product in 1985-86 and over the life of the Parliament. It involves another commitment to reduce government expenditure as a proportion of gross domestic product in 1985-86 and over the life of the Parliament.

In line with the trilogy commitments, the Government aims to reduce the deficit as a percentage of Australia's gross domestic product from its current level of 3.3 per cent to a figure closer to 2.5 per cent. For this reason, the Government announced last week expenditure cuts totalling over $1,000m for the coming financial year, beginning on 1 July. In the face of this reduction in government expenditure, it is important to correct the widespread misconception that cutting the level of public spending is for some reason incompatible with Labor's objectives for achieving greater social justice. The absolute level of government outlays is not important in order to achieve Labor's social justice objectives but rather their precise nature. In fact, the absolute level of government outlays can at times be a hindrance to the implementation of progressive social policy. The financial obligations associated with large public borrowing can erode a government's future capacity to implement social and economic change.

The legacy of a massive public debt accumulated under the Fraser-Howard regime is still influencing the Labor Government's spending priorities. Total public debt interest is at present the fourth largest Budget outlay item in the Commonwealth Budget. That is a very staggering finding. One-third of that interest item covers interest paid on State debt, which has to be paid through the Commonwealth Budget. Because public debt grew so rapidly under the Fraser-Howard Government, more money is now spent by the Commonwealth Government on interest to service public debt than it spends on education and defence. It is quite a staggering finding that the accounts of the Commonwealth Government show that more money is being spent on the annual interest bill of the Commonwealth than the nation allocates in the Commonwealth Budget to be spent on education and defence.

It is also very clear that the interest bill is now nearly as high as Commonwealth health payments allocated in the Budget. Interest payments are the fourth largest item in Budget outlays and expenditures and they are not a great distance behind the third largest outlay item. I think that all Australians would agree that this trend must be reversed. We cannot afford such a large interest bill. It is the product of years of government by the Liberals on the time payment plan when they spent money and decided to worry about financing outlays later. It is the price we are now paying for the policies of the Fraser-Howard Government.