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the budget choice has never been clearer nor more important



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John Hewson Leader of the Opposition M e d i a R e l e a s e

196/91 18 August 1991

The Budget Choice Has Never Been Clearer Nor More Important

The Budget must be scrutinised against,one simple criterion: is it designed to save the jobs of Australians or is it designed to save the Prime Minister's job?

Last week's National Accounts and Balance of Payments data set the scene. The major points were:

. further substantial evidence of the depth and duration of our rolling recession, the worst in 60 years

• a massive 9 per cent decline (in real terms) in investment in plant and equipment in the June quarter highlighting the fact that the prospects for job growth in the near future remain very weak;

. the household savings ratio at 4.3 per cent was the lowest ever recorded; and

. despite a significant reduction in the current account

deficit in 1990-91, Australia's net income deficit - the cost of servicing our ballooning international debts - actually increased, confirming the threat of our huge foreign debt on our already declining living standards and

the extent of the financial constraint which has already been levied on the future of our children.

These data crystallised Australia's major economic problems. They indicate that despite the worst recession in living memory, our economic fundamentals are set to decline further.

Notwithstanding the Government's hollow talk of better times ahead and premature declarations of victory over inflation and in the battle for structural reform, Australians have never before faced the prospect of both relative and absolute economic decline.

So far, the Hawke Government's "compassionate" economic policies have produced:

. a decline in average weekly earnings in real terms;

. an significant increase in the average tax rate paid by a

single income family on average weekly earnings with two children;

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. an increase in the marginal tax rate faced by a person on

average weekly earnings from 30 per cent in 1983 to 39.25 per cent (including the Medicare levy) at present;

. a major decline in the affordability of housing in

Australia;

. an increase of 56 per cent in the number of families living in poverty since 1983 (the Brotherhood of St Lawrence estimated that in 1990 over 2 million Australians lived in poverty); and

. a significant widening of the income gap between the rich and the poor since 1983 and only the top 10% of taxpayers are better of f .

The pain inflicted on Australians under this Labor Government has been for absolutely no gain.

The privileged in Bob Hawke's Australia are the wharfies and others in feather-bedded jobs, the trade union bosses, a couple of business mates . and those few, who have benefited either because they have received some special or favoured or privileged deal from the Prime Minister ort from the restrictive work and management practices which the Government has failed to

eliminate.

Against this background, The Government's most blatant dishonesty and hypocrisy relates to its charge that the Opposition lacks compassion and plans a wicked attacked on the poor and working Australians, by introducing a Goods and Services Tax.

This is clearly demonstrated by the fact that the Government's own major consumption tax - the wholesale sales tax - has

increased by over 200 per cent since 1982-83 - most of the

changes have been unannounced - and no direct compensation has been paid to low income earners.

Moreover, the tax that the Government now denounces so

hysterically is the selfsame tax the Government wanted to introduce in 1985, but it did not have the courage of its

convictions and was easily rolled, once again, by Bill Kelty and his union mates.

The usual spate of pre-Budget leaks indicate that this Budget will do nothing to address our economic problems.

According to recent press reports, one of the mainstays of this Budget is the mini-Accord stitched up by Hawke and Kelty at a secret meeting at the Lodge last week. This deal is an attempt by the Prime Minister to break the Keating/Kelty axis on wages policy in particular, and on the leadership, in general.

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The compulsory superannuation "pay-roll tax" to be imposed on business is very short-sighted. It will do nothing to increase total savings and will cost jobs and investment.

However, given the strength of Kelty's personal support for the former Treasurer, don't be surprised if in the coming weeks the ACTU Secretary distances himself from the Hawke/Kerin Budget by publicly criticising the Budget's employment or earnings

assumptions as difficult to achieve.

The Budget must also be examined for the extent of the pay-back to Brian Howe and some of his looney mates on the Left for

supporting the Prime Minister in his leadership struggle in June. These are likely to take the form of new "cities programs", assistance to Bob Hawke's "new poor" and other sops which will essentially mean more jobs for bureaucrats and labour mates, but

little real improvement in our cities or in sustainable job prospects for the private sector.

But, the Prime Minister will undoubtedly claim it to be a tough Budget. According to the leaks he will make some minor and much overdue changes to Medicare, in an attempt to reduce the massive blow-out in Medicare costs that is in prospect.

Mr Hawke says that this Budget's theme is "sustainable growth with equity". This is code for the Government doesn't have a clue.

He tells us that the aim is to preserve "the structural integrity of the Budget". This is code for giving up on responsible Budget policy and forcing Australians to live with a much higher Budget deficit.

At a time when Australia needs leadership as never before, the Government is most likely to produce a "dog's breakfast" budget.

What else can it be (?), given the pressures on Hawke to try to break up the Kelty/Keating axis, pay back Brian Howe and the looney Left, while looking "tough", and "compassionate", and all that simultaneously.

As a result, there will be lots of important-sounding initiatives and claims that there is no "new" spending but nothing that really tackles the fundamental economic malaise of a country which has relied too long on luck.

This Government has no policy solution because it has no

philosophy.

The Labor Party was founded in the revolt of workers against the robber barons of 19th century capitalism. Those days pitted scarcely literate workers against the whole armoury of the establishment.

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The modern Australian worker does not need a panoply of

protection and the modern Australian trade union does not deserve to run the elected Government.

Everyone now knows - Labor Ministers included - that market discipline is essential to efficient, productive enterprise.

But this Government is too steeped in the rhetoric of welfare and too close to vested interests to deliver the fundamental reform Australia needs.

If this Budget is to address Australia's fundamental economic problems it must include:

. ' a commitment to price stability to lock in an inflation outcome of 0 to 2 per cent;

. a commitment to labour market reform to refocus wage

determination at the enterprise level so that wage

increases reflect productivity improvements;

. a commitment to tax reform to abolish the insidious,

ramshackle and regressive wholesale sales tax, introduce a broadly based goods and services tax and lower personal tax to encourage work, investment and savings;

. a commitment to reducing government spending so that waste, duplication and rorts are eliminated;

. a commitment to contracting out to ensure that government services are delivered most efficiently;

. a commitment to the privatisation of a wide range of

government business enterprises to ensure that they are owned and managed in the private sector; and

. a commitment to genuine micro-economic reform and a

competitive environment for industry to reduce the cost disadvantages faced by Australian business in land

transport, aviation, on the waterfront, in electricity generation and communications.

The Coalition's policies stem from our fundamental conviction that people, rather than governments or institutions, are better able to run their own lives and our absolute confidence, based

on universal experience, that the private sector, operating in freer and more competitive markets, is the only genuine engine of sustainable prosperity.

Australia will have the infrastructure it needs and Australians will have the social services they deserve, if and only the private sector flourishes.

We want to move more and more Government jobs into the private sector - not because we want to cut services but because we want services to be delivered in the most efficient fashion.

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This Budget will illustrate the stark choice facing Australia, between a Government tinkering at the margin, simply responding to pressures and without a clear sense of direction, and an Opposition that is determined to deliver the essential reforms

in accordance with clear cut, strategic, medium-term objectives.

Under the Hawke Government, the future will resemble the past - the Hawke Government's future is the promise of another giant step backwards.

The Opposition doesn't promise overnight miracles - that would be irresponsible. We just promise long overdue and urgently needed change.

The Government offers the certainty of further decline.

The Opposition offers a genuine chance for a secure future if we change the necessary policies, and we all change our attitudes and we all lift our game.

I challenge the Government to prove me wrong.

This Budget is its last big chance.

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