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Monday, 20 May 1985
Page: 2186


Senator HILL(8.27) —Appropriation Bill (No. 3) 1984-85 and Appropriation Bill (No. 4) 1984-85 deal with additional appropriations of approximately $550m to meet new commitments of the Government since its last Budget, to cover costs and price increases and also exchange rate fluctuations. The debate therefore raises for further consideration this Government's attitude to critical economic issues currently facing Australia, particularly in relation to its expansionary economic policies about which we have just heard a great deal from Senator Short, matters concerning its wage fixing regime and matters concerning the massive devaluation in the dollar that has occurred this year.

I suggest that this debate about additional expenditure is opportune in view of the statement by the Treasurer (Mr Keating) of 14 May claiming to reflect an intention to reduce expenditures. The Hawke Government, since its election over two years ago, has indicated a willingness to have as its standard responsible economic management. It will be judged on whether it achieves that goal. Its rhetoric will have to be matched by action. This Government's leadership performance to date indicates an uncertainty of purpose at a time when the economy requires clear and decisive action.

The economic policy challenges facing this Government in 1985 are quite different from the challenges it faced in 1983. Over the past two years the economy has recovered from recession to a certain extent and has returned at least to improved rates of growth. I remind the Senate that the Opposition has not hesitated to welcome the recovery and to acknowledge government initiatives which it believes have contributed to that recovery. The fall in the rate of unemployment to below 9 per cent, together with some improved rates of employment growth, have been welcomed as a sign that the economy has moved to an upturn. Lower rates of inflation have improved our chances of becoming more internationally competitive, while the operation of the prices and incomes accord has no doubt played a role in minimising excessive wage increases during the recovery phase.

On the other hand, the Opposition also recognises that the Government has had a relatively easy road in overseeing this recovery. Throughout the two years it has been in office it has experienced the world economic upturn, driven by a continually expanding American economy which provided the Government with opportunities to exploit a healthier trading environment. Growth rates have returned to more normal levels following the ending of the drought, and the private sector took advantage of the previous Government's wage pause initiative. The task to hand in 1985 is to make sure the recovery is sustained. It is now time for the economically more difficult decisions to be made so that recovery becomes sustained economic growth.

The challenge at hand is the achievement of sustained economic growth which will provide higher standards of living for all Australians. The coalition parties believe this challenge must be met with policies which create the right conditions which will produce high rates of employment, low rates of inflation, a competitive and export oriented economy and a labour market fully responsive to the increasingly rapid changes in world markets. To this end it is our belief that an important task of government is to ensure the efficient operation of market forces, thereby minimising the barriers and restrictions on economic growth. For such policies to be successful they must not only be clear in intent but also consistent in application. Sadly this Government appears to have lost its way.

While Government spokesmen, in particular the Prime Minister (Mr Hawke) and the Treasurer, have been more than willing to embrace some of the rhetoric of freer markets, the primacy of the private sector and the need for restraint in government outlays, it is increasingly obvious that they are unwilling or unable to take the necessarily difficult decisions to bring those objectives to reality. We readily acknowledge that attempts have been made by this Government to cut itself adrift from the moribund socialist ideology of the last century. Initiatives which have led to a freeing up of the financial markets are a case in point. Despite predictible opposition which came from the left wing of the Party, and is still coming from that faction, the Treasurer has succeeded in instituting that long overdue reform and, as the previous speaker, Senator Short, has said, we applaud it. But one must ask how serious this Government really is when its laudable efforts in financial deregulation cannot be matched by any serious effort at deregulating the wage-fixing system. It is this inconsistency which threatens to dissipate the gains made during the economic recovery and to condemn Australia to further years of low growth, international non-competitiveness and continued high rates of unemployment.

For example, one may ask: What does the Government intend doing to ensure the positive effects of the devalued dollar are not lost through a further round of fully indexed wage rises? What does this Government intend doing to lower the structural component of the deficit, a deficit mainly of its own making? What policies is the Government intending to pursue in order to overcome the unacceptably high national debt? What policies is the Government putting in place which will address our chronically poor trading performance? Where, in fact, in the statement delivered by the Treasurer last week is there any evidence of the Government's intention to provide clear and decisive leadership to an economy under threat of only temporary recovery?

In that regard it is important to understand clearly what was involved in the Treasurer's statement last week. It was, in effect, an announcement that something in the order of $1.25 billion is to be shaved off the Forward Estimates of outlays for the 1985-86 financial year. However, there is nothing unique in the process whereby Forward Estimates for the coming financial year are reduced during pre-Budget discussions. The only thing which is unique is that, for the first time, a government has made public the specific cutbacks in the annual departmental and ministerial claims for future spending programs. In essence, what the Government has done is turn what is a commonplace pre-Budget procedure into a glittering showcase of apparent government fiscal responsibility. It is an apparent, rather than real, exercise in fiscal responsibility for two reasons: First, these shavings are to be achieved by cutbacks in anticipated growth in outlays. In other words, government outlays will continue to grow; only now the growth will be at a lower rate. It needs to be noted that of the $1.25 billion taken off the Forward Estimates, only $237.2m represents actual cuts in expenditure on the 1984-85 Budget. Despite the Prime Minister's gloating references to the many satisfied responses of business organisations to this statement, I remind the Senate that the Australian Financial Review placed matters in their proper perspective the day following the statement when it reported:

On the contrary, the cuts instead of being basic and lasting reductions are for the most part simply temporary reductions in growth rates in various classifications of expenditure or deferments of expenditures to future Budgets.

Many of the so-called savings do not even represent ongoing budgetary reductions. I remind Senator Walsh that the Government can sell Belconnen Mall only once, assuming, that is, that a buyer can be found. Furthermore, there are examples, such as the rephasing of the participation and equity program for schools, which do not represent cuts in spending in any real sense; the money is still going to be spent, only over a longer period.

The second reason these so-called savings on Forward Estimates are a more apparent than real attempt to come to grips with expenditure reduction is the poor track record of this Government in applying any consistent attitude to expenditure reductions. While the following figures have been mentioned before, I believe they are worth repeating in view of the Government's desperate desire to be seen to be responsible economic managers. In the first Hawke Budget, in 1983-84, the Government added approximately $2.4 billion to its discretionary spending program. Prior to the Budget it had reduced Forward Estimates by approximately $1.2 billion. In 1984-85, the Forward Estimates were reduced by $500m prior to the Government bringing down a Budget which added $1.138 billion to its spending programs. We will have to wait until the August Budget to see whether the Government is really serious this time in reducing its expenditure. I would suggest that its performance to date gives little hope that, on this occasion, it will get it right. Therefore, the entire exercise that we have witnessed is one of feigned toughness.

As for the much heralded pain the statement was meant to bring to sections of the community, the Australian Financial Review correctly observed how temporary that pain could be. It stated:

The message to those affected is clear: Don't complain too loudly, because you'll get it back before the next election.

If in fact this turns out to be the case, Australia has once again been cruelly misled by this Government. We have, I fear, been subjected to an elaborate publicity exercise under the guise of responsible economic management. The more difficult and important tasks remain. Yet the Government has failed to address itself to vital economic issues. The Government remains negligent on the question of wages policy. The Treasurer's statement last week and the subsequent statements by both him and the Prime Minister clearly indicate this Government's incapacity or unwillingness to exert any influence on what appears will be the inevitable national wage rise without allowance for the effect of the devalued dollar. The Treasurer himself recognises the importance to a sustained rate of growth of wage levels which do not place unacceptable cost burdens on the private sector. On page 46 of his statement, he stated:

This Government's accord with the trade union movement provides a mechanism through which a wages outcome, consistent with contrived strong growth in the economy, can be achieved. Such an outcome must involve a lesser real wage level during the adjustment period than would otherwise have applied.

Yet despite the Government's recognition of the centrality of a correct wage outcome to maintain the momentum of recovery, the wage indexation case will proceed in September along with its inevitable outcome of a fully indexed national wage rise. In lieu of its abdication of responsible leadership in seeking to discount the next national wage increase for the effects of the devaluation, the Government announces in the same breath that a deferral of the national productivity case will provide an adequate release valve for cost pressures impacting on the private sector. This of course presumes that the national productivity case has a legitimate role to play in the first place. As the Business Council of Australia makes clear in its April 1985 Bulletin:

A large part of the productivity gains in Australia have already been distributed to labour through remuneration in the form of superannuation, hours, allowances, redundancy provisions as well as wages drift which has occurred beyond indexation.

With the devaluation and the Government's intention to support the full indexation in September, the resulting wage increase will further impact on already increasing cost pressures. Rather we are told that the Government may well address the need for some form of discounting for devaluation in the national wage case in early 1986.

However, business confidence is ill-served by a government which shows an unwillingness to address important issues now, preferring instead to postpone the exercise of its responsibilities for another six months. The question that immediately arises is what will happen over the next six months to change the attitude of the Australian Council of Trade Unions to one of support for the necessity to discount wage rises. If the recovery were based on a more solid foundation it may have been argued that continued adherence to full wage indexation without discounting for the effects of devaluation might be capable of being absorbed by the economy. It is clear, however, that the economic recovery which we have experienced, remains fragile and uneven. It is incapable at this stage of withstanding the pressures imposed by a full indexation wage rise.

It should be remembered in that context that employment growth has slowed down markedly and unemployment remains at 8 per cent, with little prospect of a further substantial decline. Australia's growth rates are no better than they were two decades ago and are of insufficient magnitude to absorb fully the expected growth in numbers entering the labour market. Our trade deficit remains of the order of $1.7 billion and a deficit in the balance of payments on current account is still expected to be of the order of $11 billion. Real interest rates remain historically high and the high servicing requirement of our net external debt will continue to place an increasing burden on Australia's balance of payments.

Because of the continued uncertainties faced within the economy we need from this Government a clear commitment to policies which will properly secure the economic recovery. That objective is not served by statements by the Treasurer which are long on rhetoric but short on substance. Despite the statement last week, the Hawke Government remains Australia's highest spending and highest taxing government in the country's peacetime history. Despite the Treasurer's statement, the fact remains that, while the previous Government was able to maintain expenditure increases in real terms by a mere 2 per cent, the Hawke Government has overseen budgetary expenditure increases of 6.1 per cent and 7.7 per cent in real terms in its first two Budgets. Despite the Treasurer's statement, it is the Hawke Government's spending policies which have pushed Budget outlays as a proportion of gross domestic product to an expected 31.3 per cent this financial year-the highest proportion ever.

The important question which remains is whether this Government is really serious when it claims it is concerned with Australia's long term economic health. If this Government is willing to show real leadership it is clear from the record of the Opposition that we will support that leadership. We will support regulatory reform which is consistent. We will support initiatives which will result in permanent reductions in the structural deficit. We will support moves to real rather than cosmetic expenditure restraint. We will support policies initiated by this Government which we consider will contribute to a more internationally competitive and export oriented Australian economy. We cannot support statements like the one delivered by the Treasurer last week which patently fails to tackle the real issues of securing a sustainable economic recovery.