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Mr Crean sadly "out of touch" too



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FROM 1. 17.1989 13:40 P . 2

P A R L I A M E N T o f A U S T R A L I A

H O U S E O R R E P R E S E N T A T I V E S

PRESS releaseD R J O H N R. H E W S O N , M .P . SHADOW M IN IS TE R FOR FINANCE M E M B E R FOR W ENTWORTH

No. 3/89

COMMONWEALTH PARLIAMENTARY LIBRARY MICAH

17 January, 1988

MR CREAN SADLY "OUT OF TOUCH" TOO

Today's statement by Simon Crean on ABC radio again depicts the ludicrous situation whereby the SovexmiienL lias the President of the ACTU out defending its economic strategy, while the Treasurer is absent and the Acting Treasurer continues to make

"No Comment".

Moreover, Simon Crean's comments reveal that he is sadly out of touch with basic economic realities.

For example, he refers to the fact that the "budget estimates of inflation and current account might be out"♦

Well they are not just "out" but more like "out Ln left field". For example, it now looks like the current account deficit could be between $12-514 billion this year compared to the budget estimate of $9.5 billion and it seems unlikely that inflation will fall much below 6.0 per cent or so, compared to the

Government's budget estimate of 4.5 per cent.

In these terms the forecasts are not just "out", they are wildly off track.

Mr Crean also makes the somewhat surprising statement that "the fact that we have had enormous employment growth, have had incomes increasing as a result of a whole range of factors, mean· there are additional revenues to government , , , , The

surplus and therefore the amount available for tax cuts distribution will, in my view, be greater than the projected budget forecast..... Tax cuts are not in jeopardy".

While it is true that the employment growth would have

contributed to additional revenue to Government, it doesn't necessarily follow that the amount available for tax cuts Is "greater", nor does it mean that the tax cuts are not in

jeopardy.

More revenue will only be available for tax cuts if the

Government fails to stick to its stated intention of using the Budget surplus to repay debt.

Moreover, "the enormous employment growth" is one of the best indicators that the economy is overheated. As such this

FROM 1. 17.1989 13:41 P . 3

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"evidence" really reduces the economic justification for any additional stimulus to economic activity through tax cute. In making this statement Mr Crean seems to have forgotten that Mr Hawke qualified the case for tax cuts on 18 November, id88, by

the possibility that the economy might still be too overheated,

Mr Crean should realise that to give wage increases (which he now proposes to loosley base on "restructuring") and tax cuts, without creating the room by significant cuts in Government expenditure, is economic madness in our current difficult

economic circumstances.

Mr Crean also shows an acute sensitivity to the suggestion of the Opposition Parties that wages policy needs to be reviewed. He claims that such an idea "could wipe out all the benefits of the past six years to wages policy and the Accord".

The fact is that any benefits of the last 5 or 6 years are being wiped out under the present system by the substantial break out underway in key public sector organisations and mounting pressure for wage increases, both inside the system, and outside

through drift etc.

Mr Crean surely cannot deny that whereas he and Mr Kelty had, in the past, contemplated a zero wage increase in 1989/90, they have now given that up as a possibility.

The Government is now being forced to pay a very real price for the so-called "special relationship" that it is said to have with Mr Crean and Mr Kelty.

Finally, for Mr Crean to suggest that the current wages policy directly links wage movements to productivity, is obviously nonsense.

Effectively across the board wage increases, irrespective of the economic circumstances of particular firms and particular industries, and independent of the productivity of workers in those firms and industries, is a formula for disaster in a

country which has a desperate need to improve its international competitiveness.

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