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Wednesday, 2 October 1974
Page: 1590


Senator GIETZELT (New South Wales) - Yesterday, I was speaking in support of the motion that the Senate take note of the Budget Papers and in oppositon to the amendment moved to that motion by Senator Withers, the Leader of the Opposition. I was making the point that we in Australia are in a very difficult inflationary situation, as indeed are the people in most of the countries in the western world. I was able to produce some evidence to show that world economists, in analysing the problems facing the economies of the world, were stressing that the surplus money supply situation created deliberately by the American Government had now flowed into the economies of all the other countries tradingwith the United States of America. Professor Johnson pointed out that it was impossible for countries in a domestic situation to do anything that would have more than a minimal effect in curing this major international problem. I was also stating that, in addition to it being an international problem, it was a problem associated with the private sector of the economy.

Since making those statements, I was fortunate enough to receive in the post this morning a copy of a speech made at a meeting of the Rotary Club of Sydney only a week ago yesterday by the Chairman of the Sydney Stock Exchange Limited, Mr Valder. I found that he made certain comments that only add to the points that I was making yesterday. He said:

We are in the midst of a credit squeeze designed, one hopes, to rectify some of these inflationary problems. At the same time our market is being influenced by international factors: put simply- the threat of a developing world recession. Which means that we are not alone in our problems.

Mr Valderwent on to say; I think it is important for Opposition senators to take this into consideration: . . the Australian economy is still in pretty fair shapeliving standards are high, the level of employment is still (by any past standards) high, we still have our great natural resources, and we have largely escaped the consequences of the international oil crisis, . . .

This is one of the points that Dr Cairns has been making. He has said that we are still in a fortunate position in this country. I think that statement underlines the fact that none of the current inflationary problems that we face in Australia is the result of the actions of this second Whitlam Labor Government, a government which has been in office for only 20 months. Subsequently, I will deal at much greater length with the attitude that the Opposition Parties are taking in respect of the Budget and the inflationary problems. I believe that their attitudes are inadequate, inane and insipid and are completely out of character with the responsible attitude that political parties should be taking at this time. However, at the moment I would like to deal with the Budget itself, to lay the dust on the wilful distortions by the Opposition Parties, particularly by Mr Snedden and his colleagues, and to try to present the Budget to the Australian people in an objective way.

I said yesterday that the Budget has not set out to curb inflation. Having regard to what I have read to the Senate from the statements of international economists and other people, I think it could be said that no budget can curb inflation on the domestic front. The Government does not see the Budget as an instrument in the fight against inflation. The Budget represents an attempt to harmonise Government income with an expenditure planned to accommodate the Labor Government's electoral program which was endorsed by the people twice in the last 2 years. The Australian Government does not intend to follow the mishmash meanderings of the previous administrations. It does not intend to curtail public sector activity. It intends to press ahead with a program that was endorsed by the Australian people. Of course, the central strategy in the program of this Government is to transfer from the private sector such resources as will enable the public sector to fulfil its proper role in developing our nation. It is a responsible Budget because it intends to help all arms of government fulfil their public works programs. It is a responsible Budget because it seeks to improve the various groups in our community who need government help, whether they be war pensioners, age or invalid pensioners. It is a responsible Budget because it makes available an ever increasing amount to the States so that education, housing, sewerage, roads and public transport are not disadvantaged by private sector mismanagement of resources in this country.

I want to refer to one of the Budget documents, which was made available on Budget night, to indicate to the Senate and to the people at large what this Government is about in its endeavours to transfer resources to the public sector. I am comparing the 1972-73 Snedden Budget with the Budget produced by the Treasurer (Mr Crean) in 1974-75. Over that 2-year period we have budgeted $2,4 19m more for public sector expenditure than was provided in the last Snedden Budget. Which Opposition senator is prepared to say that the money we are spending in the various sectors should be curtailed? For example, expenditure on education has gone from $259.4m to $1,172. 9m, an increase of $9 13 m. I have not heard any member of the Opposition parties, either in the other place or here, suggest that there should be a cut in the education budget. In health expenditure we have gone from $20.5m to $1 15.2m, and it is interesting to note that these are moneys which are being paid by the Commonwealth to State agencies. The Commonwealth's involvement in housing has gone from $24.2m in the last Snedden Budget to $263.2m. In the areas of urban and regional development we spent $ 1 m under Snedden. What a wonderful amount for a government to provide in accepting responsibility for the improving the life styles in our urban areas. The expenditure has gone from $ 1 m to $25 1 .7m in the Crean Budget. In the infrastructure areas, that is, transport and communication, water supply, electricity, labour and employment, industry assistance and other general public purposes, there has been an increase from the Snedden Budget of 2 years ago to the present Budget of $150m.

I believe that the Government is in this Budget carrying out its responsibilities to endeavour to achieve balanced development in our community. It is a responsible Budget because taxation, particularly on the lower incomes, has been considerably reduced and in some cases almost eliminated. It is all very well for people to talk now about the problem of taxation when until this Budget the taxation scales were exactly the same as those that operated during the entire 23 years of the anti-Labor administrations. Yet this Government is criticised for not doing something about the taxation scales. We have brought about some reconstruction of the taxation scales on this occasion. It is interesting to read the criticism embraced in the amendment moved by Senator Withers and spoken to at length by all Opposition members relating to the transfer of funds from the private sector to the public sector via income tax. In its amendment the Opposition seeks to suggest that there is something wrong with the decision of the Government to collect 45 per cent more from this section of the taxation scale. It ignores the fact that in 1 962-63 the Commonwealth collected $54 lm from that same sector of income- pay as you earn taxation- and in 1964-65, in a comparable period, it collected $785.262m, which happens to be precisely the same increase of 45 per cent for which we are criticised on this occasion.

This is a responsible Budget because for the first time local government has been recognised as a vital third arm in the trinity of government in this country with the magnificent untied grant- no strings attached- of $56m. It is the first time in the history of this country that the Commonwealth has accepted financial responsibility for local government and given it assistance. It is a responsible Budget because for the first time the Australian Government has embarked on a major 5-year program to expand and modernise public hospitals and other health institutions in the States. It is a responsible Budget because the Government has put its money where its mouth is as far as Aborigines are concerned, spending $164m in this financial year, the greatest amount ever allocated to help our indigenous people. It is a responsible Budget because we have allocated record amounts to the States for public housing, for the establishment of a new Australian housing corporation and for the further liberalising of loans for defence service homes. It is a responsible Budget because it has allocated record sums for urban redevelopment to improve materially the life styles of the great majority of the Australian people. It is a responsible Budget because we have allocated for the first time $12m for a legal aid service to give assistance to the lower income groups and to poor and disadvantaged people, particularly our own indigenes.

I could go on and on itemising the great new initiatives taken by this Government, initiatives that undoubtedly are being engulfed by the obtuse attitude taken by the Opposition and by sections of the daily Press. Some of those who write the daily Press editorials never seem to find time to read the small print, never seem to find time to give credit where it is due. If they did that I am sure a lot of the rubbish and trash that is printed as editorial comment in some of the more biased journals in our country would not appear. I do not glibly say that there are no weaknesses in this Budget. The increased Post Office charges, brought about largely by the imposition by the Treasury of interest rate charges year by year on the Post Office- an amount of $200m will be paid to Consolidated Revenue this year- are to be regretted. I hope the time will come when this Government will be able to bring about the necessary reorganisation of the Post Office so that we can have an efficient public instrumentality, one able to give service at a resonable price to the Australian community.

I deal now with the criticisms that have been levelled at the Government by some of the State

Premiers, particularly the Premier of New South Wales. Of course the Government has to have this criticism levelled at it from the Leader of the Opposition (Mr Snedden) and from Opposition speakers here. They tell the Government how it should have done this and how it should have done that in this Budget. Words fail me when I find that Opposition speakers are suggesting further expenditure of public moneys in the public sector. What is the real position? The facts are that in terms of the Budgets from 1972 to 1974, that is the Snedden Budget and the Crean Budget, there was an increase in general revenue assistance to the States of some 40 per cent over the 2-year period. Special grants show a similar increase of some 40 per cent. More funds are being made available to the States now than ever before in the history of the Commonwealth. I can only say to those who are endeavouring to create the impression that the States have to increase their Budgets in order to make up the leeway that there must be something wrong with the administration of the State organisations. Honourable senators might like to look at table 3, the estimates of receipts and summary of estimated expenditure, to make a comparison of the amounts allocated to the States in 1973-74 and 1974-75. Last year, in terms of expenditure, payments to the States represented 28 per cent of the national Budget. This year they have increased to 30 per cent. Last year, of course, it was an even higher increase, something like 27 per cent on the previous year. So there is just no truth in the exaggerated claims made by the Opposition Parties and the State Premiers.

I would like to add emphasis to the point that has been made by Senator Steele Hall about the attitude of the Opposition Parties to the Budget and to the economic questions and problems facing this country. I have here a copy of the speech made by Mr Snedden titled 'Economic Policy Statement for a Liberal-Country Party Government'. What did he say in this document? He said that in a 1 974-75 Budget to be introduced in August a Liberal government would reduce the rate of growth in total government spending. Anybody can read in Hansard that in his speech in the other place he criticised the Australian Government for not making more funds available to the States. We have had honourable senators in this place suggesting that the Australian Government should have made more money available for the States and for public expenditure. So here we have the Leader of the Liberal Party and the alternate Prime Minister, himself a former Treasurer, suggesting that there should be a cut in the rate of growth.

He also says that we should reduce taxation. It is interesting to read one article which I have time to deal with today. It appeared in the 'Age' and was written by the economics writer on 25 September. The heading is: 'Snedden confuses his cures'. The article goes on to say that Mr Snedden said that Australia's economy is in a mess- 'The Leader of the Opposition made this point well last night' said the economics writer. But let us analyse what the Leader of the Opposition said. He said that the first priority should be for this Government to deal with inflation. Then he pointed out that we have to do this by maintaining economic growth and full employment. One does not have to be an economist to appreciate that these 2 questions are closely related.

The article went on to say that Mr Snedden said that we have to stop unemployment, which he claims is 2. 1 7 per cent and rising. Of course, he does not tell the Australian people that in the last year of his office, and I am sure that he will concede that we could not be blamed for the unemployment figures as at December 1972, the figure was 2.39 per cent of the work force. We had been in office only a matter of days when those figures became available. Here he is complaining, and rightly so, that we had to stop unemployment which had reached 2. 1 7 per cent. If Mr Snedden believes unemployment should be reduced then from his standpoint the Budget is not sufficiently expansionary. Surely he would have to take the view that the Budget should go further in public spending.

Mr Sneddensaid that he would reduce taxation by $ 1 ,000m, that he would cut government spending by 25 per cent and that this would result, according to his own figures, in a saving on expenditure of something like $900m. In other words, we would cut income by about $ 1,000m and expenditure by about $900m. This would mean that there would not be much difference between the present Government's Budget and that suggested by Mr Snedden. For example, if consumption spending grows as a result of spending in the private sector it is difficult to see how private investment can decline and avoid another situation of demand inflation. I think the point can be made quite correctly that if we have a growth in private consumption plus a cutback in government spending it would lead to higher business confidence and a higher level of investment spending. So we would be confronted with the same sort of money supply position which was evident when this Government came into office. I refer the Senate to the statement issued by the Treasurer a few days ago in which he pointed out that in the 1972-73 period the money supply had increased by 26 per cent, which, he said, was clearly excessive. He said that the policy in 1973 has been directed to slowing growth in the money supply and the increase during the year was held to 14 per cent.

So Mr Snedden does not seem to have any clear path to follow and does not seem to have any understanding of the economic situation facing our country. If the squeeze is relaxed, as he has suggested, then investment spending will accelerate. If investment picks up we will soon be back into that vicious demand inflationary period which was evident in the early part of 1973, and the Government sector will be competing with the private sector for resources, forcing up prices again as they did a year ago. And as happened in 1973 it will be the private sector that will get on top of the public sector. The Leader of the Opposition is attacking the Government for, to use his words, 'the brutal treatment of the States at the Loan Council gathering in June'. He also suggested that there is something wrong with the fall in defence expenditure. Is he suggesting that we should get it back to the level at which it was in his period of office? If he is suggesting that the pro rata rate should be increased to 3.5 per cent of the gross national product it would mean the expenditure of an additional $500m and a further increase in Government spending. It reminds me of a story about the lion and the bull which goes something like this: 'The lion sprang upon the bull and devoured him. After he had feasted he felt so good that he roared and roared. The noise attracted hunters and they killed the lion. The moral of which is that when you are full of bull, keep your mouth shut'.

I would like to refer in the few moments I have left to some of Mr Snedden 's infamous remarks on the economy during the period 1970 to 1973. In a debate in the House of Representatives on 27 August 1970 he said:

Unfortunately we have not solved all our economic problems. One might say: 'Which country has?' Inflationary pressures are still with us. Over the decade 1959-60 to 1969-70 the consumer price index rose at an annual rate of nearly 2Vi per cent. Over the last 5 years the average annual increase has been a little over 3 per cent. Last year the increase was nearly 4 per cent. And in the June quarter of 1 970 it was at an annual rate in excess of 5 per cent. It is true that prices have risen even faster in many other countries, but whereas the inflation rate is tending to slow down overseas it is tending to rise in Australia.

Words of wisdom from the potential Prime Minister of Australia. But listen to these words of wisdom, these little gems, that came from the Leader of the Opposition. He continued:

When these pressures are running high you need high interest rates to induce people to save and lend.

What lovely words of wisdom to fall from the mouth of the man who, as Treasurer, held the economic reins of this country for some two or three years and failed to arrest the inflationary trend. Later on he said:

We live in an atmosphere today that encourages cost-push inflation.

On 18 February 1971 he said: to apply the wrong remedy would mean creating new problems, such as under-employment and underproduction which other countries are experiencing, without curing the problem of inflation.

These other countries still have a higher inflation rate than we have. Later on he said:

The economic outlook for 1971, as it appears, is that in 1971 there is an excess demand threat, but excess demand does not presently exist.

In another part of the speech he said:

In Australia there is a danger of excess demand.

I cannot quite follow his reasoning or even his statements in the one speech. Then he said:

After the last Budget was presented other decisions were taken which could have resulted in an over-expansionary Budget . . . Current wage inflation does not necessarily mean that there will be an excess demand . . . There may be no actual excess demand for goods as distinct from excess prices.

In one speech, on one day and in one place Mr Snedden contradicted himself on 3 different occasions. On 17 August 1971 when speaking in the debate on the Appropriation Bill he stated:

Even more than usually the Government has this year found it necessary to shape its Budget to serve an overriding economic purpose. Australia is in the grip of inflationary pressures.

This was said by the Treasurer at that time. He continued:

The rate of increase in costs and prices is already fast and has tended to become faster. This is a serious condition. If allowed to develop unchecked it will cause increasing economic and social hardship to many people, add to the burdens of rural industries already depressed -

One would think that rural industries had never been depressed before there was a Labor Government. Mr Snedden is admitting that in the period when he was Treasurer depression already existed in many rural areas. He continued: disrupt development plans of great promise and undermine the rich possibilities of growth which our future unquestionably holds . . .

On 1 December 1 97 1 Mr Snedden in attacking an Opposition motion of censure on the Government stated:

An Opposition can attempt to obtain political advantage out of difficult international and domestic economic circumstances. But it can be regarded as responsible only if it has an economic platform for examination and review . . . The Government, in early 1971, took action to impose restraint in areas where restraint seemed to be necessary- public spending, private investment in new plant and equipment and non-dwelling building construction. Given this background it was natural that accompanying the strategy adopted in the last Budget was an element designed to guard against the future development of excess demand pressures.

So we have Mr Snedden, who is the alternative Prime Minister, suggesting certain courses of action which this Government has already taken in relation to the current economic position in our country. Discussing the Budget strategy later in 1972 Mr Snedden said:

We see it as a critically important objective of our policy to combat the inflationary forces now running in our economy and it is against this objective that I now come to explain the strategy of this Budget and our decision to raise additional revenue. The chief instruments available to this Government and its related authorities are the annual Budget. . . Since there will still be, within Australia, a considerable increase in Commonwealth spending, it must at least be offset by an increase in Commonwealth domestic receipts from taxation and other sources of revenue.

There we have the alternative Prime Minister, the former Treasurer, using precisely the same tactic and the same strategy which the Government has used in this Budget. We are talking about the 1971 Budget. Mr Snedden stated:

Company tax will rise to raise $24m. It is proposed to raise a large part of the balance of our revenue requirements through the personal income tax rather than add to sales tax. Accordingly we propose to increase the2½ per cent levy to 5 percent.

So we have the Leader of the Opposition suggesting that there is something wrong with the Government applying the principle and tactic of raising additional revenue by personal taxation when he did precisely that in 1 97 1 . He stated:

We propose to increase the rates of custom and excise duties on cigarettes and cigars . . .

Incidentally, if one examines the income in the current Budget one sees that there is a fall-off. Whereas in the Snedden Budget of 1972-73 there was an excise income of 13.8 per cent in Federal Revenue, this figure has dropped to 1 1.4 per cent in 1974-75. So we can go on and on pointing out the inadequacies of the approach of the Opposition to this problem of the Budget. We point out that the Opposition has no real alternative policy to offer to the Australian people. I call upon the Senate to reject the amendment which has been moved by the Opposition because it does not accord with the past experience and practice of the Opposition Parties when they were in government.







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