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Keating's unsubstantiated Epac rhetoric

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I *9


Peter Reith



Mr Keating's economic strategy is falling apart and yet all he can do is give the lame apology that this time the pain will be worth it - that this time will be different. The Treasurer has been wrong in the past, that speaks for itself.

In today's EPAC speech the Treasurer said that the budget surplus will be $1.7 billion. That is a massive $6.4 billion less than his budget time estimate. A significant failure in anyone's language.

I urge people to look past Mr Keating's theatrical performances, and study what he actually says. A diary of his comments even over the last few weeks, shows that he is all over the place on:

. whether the Government wanted a recession;

. what this recession was supposed to achieve; and

. the timetable for economic recovery.

Mr Keating tells us today he has an "awesome responsibility" to the Australian people, but he won't even rise to his feet in the Parliament to answer questions about the unemployment in his own electorate.

His budget time strategy is falling apart and now he is about to embark on what he has previously said is exactly the wrong thing to do - pump priming. That is, the budget is $6 billion down and the Government has no intention, to quote from today's Australian Financial Review report, of offsetting millions of dollars in additional budget measures by nominating spending cuts in the March statement.

People remember that it was only 8 months ago at the 1990

Premiers' Conference that the Treasurer said:

"It is entirely important - it is not a matter of some accountant's fixation with numbers - that the public sector remains in surplus. That is our objective."

It is noteworthy that Mr Keating fails in his EPAC speech to refer at all to the fact that total public sector borrowing for 1990-91 will amount to billions of dollars.



Another thing that is not mentioned in Mr Keating's EPAC speech is a strategy for stabilising Australia's enormous net foreign debt. While Mr Keating (wrongly) thinks that he is on a

political winner in diverting attention to the fight against inflation he has conveniently forgotten to remember that the reason he has previously given us for engineering the recession that Australia "had to have" was to fight Australia's foreign debt problem.

Mr Keating spent a lot of his speech talking about fighting inflation but there is no proof that he intends to put in place a strategy that will see inflation fall on a sustainable basis.

Ironically, he himself notes in the speech (on page 7) his

failure in 1985, when there was a major cut in inflation, to stop a subsequent increase in the rate to around 7 per cent. Mr Keating says "... but the circumstances today are quite

different". But are they different? Isn't, he applying the same failed Accord process which delivered that 7 per cent inflation?

Inflation, Mr Keating claims, is to fall to around the budget time prediction of 6 per cent by mid 1991, and lower levels after that. Mr Keating claims this is because of his superior wage tax deals strategy. I have a message for Mr Keating - what is

happening in Australia is exactly what has happened in other economies that have gone into recession in the last 12 months. The latest BZW Economic Review records that in the UK the

consensus view is that inflation will fall to 5.2 per cent, and some commentators believe it will fall to 4.2 per cent, in 1991. In the US inflation is expected to fall to 4.6 per cent.

By way of further comparison I note that that the BZW paper shows that the inflation performance in other major countries is far superior to the performance of the Australian economy -

expectations are of 3.0 per cent inflation in Japan, 3.5 per cent in Germany, and 3.4 per cent in France, in 1991.

Finally, I simply want to note Mr Keating's lame excuse that:

"our unemployment rate may rise further, but it has an entirely different meaning [than the rise in 1982­ 83]."

Mr Keating can indulge in statistical gymnastics as much as he likes on unemployment numbers and participation rates but the fact is that well over 700,00 people are unemployed and that the seasonally adjusted unemployment rate in January 1991 was well over 9 per cent in Queensland, South Australia, Western Australia

and Tasmania. To those people their unemployment has entirely the same meaning as in 1982-83 - an enormous fall in their living standards.


Treasurer Keating, in contrast to his claim of being the only leader for Australia in the 1990's, ranks no better than the former failed Treasurers in the Whitlam Government, Cairns and Crean.

He should resign.

The new Treasurer should take charge of the March statement and turn it into a mini-budget which can at least start the whole range of economic reforms that Australia so desperatly needs.


22 February 1991

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