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Growth and the budget deficit



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Deputy Leader of the Opposition V

D25/83

NEWS RELEASE BY THE HON. JOHN HOWARD M.P.

GROWTH AND THE BUDGET DEFICIT

The Treasurer effectively admitted today that the frequently used forecast of a $9.6 billion budget deficit for 1983/84 is not credible.

In Parliament the Treasurer admitted that forecasts of economic growth for 1983/84 have increased considerably over those on which the misleading and now superseded $9.6 billion "guess" was based.

Some growth estimates, including those apparently used by the Treasurer's personal economic adviser, Dr Barry Hughes, suggest that the starting point for next year's budget deficit is in the order of $8 billion

or even a little less.

These upward growth revisions do not result from any actions by the present Government and simply represent the third set of guesses starting with the original Treasury forecast of a 1983/84 budget deficit of only

$4.2 billion.

The Treasurer's admission today confirms what I have said ever since the Government first sought to use the

$9.6 billion figure as a genuine indication of the likely size, of next year's deficit.

I said then and I have since maintained that one of the reasons for not accepting the figure was that it was based on far too gloomy a projection as to

economic growth in 1983/84.

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However, the present Government still argues that this superseded figure is a genuine indication of the state of the economy left by the previous Government.

The Treasurer knows this is false and has at last effectively admitted it.

However, this has not prevented the Prime Minister from falsely claiming that the Government has had to renege on all of its election promises because they were made "in the context of a deficit in the order, of $6 billion not $9.6 billion".

The Prime Minister's integrity is in question over this totally false statement.

The fact is that he made his promises with a reckless disregard for their economic consequences six days before any Minister of the previous Government mentioned $6 billion in relation to the 1983/84 deficit,

and at a time when he publicly supported a current year deficit 50% higher than the likely outcome.

In view of the obvious significance of these matters to the current economic debate between the Government and the Opposition and as I have nothing to hide on this matter, I have today written

the attached letter to the Treasurer

"My dear Treasurer,

The true nature of the budgetary problem faced by your Government and statements regarding it made by both the Government

and the Opposition Parties during the recent election campaign are central to the economic debate taking place at

present.

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As I am sure you will agree, the likely path of economic growth in 1983/84 will have a big impact on the size of the deficit in that year. '

I believe it will greatly enhance

debate on these matters if you were to table in the Parliament the advice you have received since becoming Treasurer both concerning growth prospects

for 1983/84 and the possible and desirable size of the budget deficit in 1983/84.

For my part, I would be perfectly happy if you were at the same time to table all advice provided by the Treasury to me regarding the size of next year's deficit.

Yours sincerely,

(John Howard) "

CANBERRA 26 May 1983