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Tuesday, 5 May 1987
Page: 2293

Senator SHORT —My question is directed to the Minister representing the Treasurer. I refer to the report in today's Sydney Morning Herald that the four State Labor Premiers have written to the Prime Minister and the Treasurer expressing concerns about possible severe cuts in State funding in next week's mini-Budget. The report says that three of the Premiers-Messrs Cain, Bannon and Burke-have stated that they will not adhere to the voluntary agreement between the Commonwealth and the States on borrowings if the mini-Budget pre-empts the forthcoming Premiers Conference by announcing details of the cuts in the mini-Budget. I ask the Minister whether these reports are correct. If so, has the Premier or Treasurer replied to these threats? If so, what was the nature of the reply? If replies have not yet been sent, what is the Government's attitude to this approach by the Labor Premiers and what implications would their threat have for monetary policy, including the level of interest rates?

Senator WALSH —I did not, in fact, see the report in the Sydney Morning Herald, but I did hear something about it from another source. I have not spoken to Mr Hawke or Mr Keating about this matter today, so I do not know whether it is true or whether they have replied. Frankly, I did not think it was all that important because there is certainly nothing new about Premiers complaining about funding from Commonwealth sources. I do not mind predicting that before the end of this month there will be at least one Premier complaining much more loudly than any Labor Premier is complaining and, ironically, that it will be the Premier who, on every other occasion, demands that Government spending be reduced. I do not think one needs a degree in Australian politics to know who that Premier will be.

Senator Robert Ray —Who is it?

Senator WALSH —I think that is quite unnecessary, Senator Ray. The latter half of Senator Short's question referred to macroeconomic management problems which could ensue if the Premiers in total, or more than one or two of them, refuse to abide by overall limits on government borrowing. That, of course, would be a problem. If that happens, the Government will obviously have to try to deal with it.

Finally, the substance of a major part of the alleged letter as reported this morning was a complaint by the Premiers that the details of the funding arrangements with the States would all be spelt out in the economic statement to be delivered on 13 May. It is not envisaged by the Government that the details of the State funding arrangements for the next financial year will be included in the 13 May statement. It will be put to the Premiers at the conference on 25 May.