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Address to Australian Merchant Bankers Association by Ian Sinclair

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P · ■ ■ .

_—r . . , ' . . ’ · _ . .

After an interestingi week .in" Parliament _in\ Canberra'· it' would · - ■ .

be strange if I did not advert to a few of the events that

distinguished it.

They can be listed as the Peacock statement, the Health

announcements and the Prime Ministerial statement on the -. · . . · ’ ■ · " · .···. *

Report of the Committee ;of Review of Commonwealth Functions. .. * · · ■

Each occurred in the political environment of the. Federal -

Parliament yet as with all matters affecting that Parliament

they have a profound impact on the whole Australian community.

Certainly, each in their own way have a bearing on the environment

in which you as merchant bankers operate.

They affect the continued good health of the. Australian economy,

a state which even the Australian Financial Review about a

fortnight ago accepted was something for which the Government -" ' ' ' . y S - * ·

could take credit. v

They continued that the recovery was now obvious, both in

business confidence as well as .in the level of private

investment and the rate of inflation. : . , ·


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First the Peacock statement. ,

It_is unfortunate t-hat: Andrew felt -himselfi no longeri able : ■ to

remain a m e mber.of the Fraser/Anthony Coalition Cabinet; · ' .

He proved himself a good Minister but no Minister can survive

on his own. He can only be effective while he is part of

' ' - . · i . ■

the team. . ■ · v .

Certainly the; significance of his resignation.and its effect

on the continued strength of Government direction and policies

can be overstated. , ' ■ ' . .;

■· · / · 1 ' ''

• . ■ · _ . ' ' ’ ’

Under the Westminster system the Cabinet consists of elected

Members of Parliament. Each shares a collective responsibility

to the Government as well as a continuing personal responsibility

to his electorate. ,

All Ministers do,not participate in all decisions yet each

accepts the majority result or the decision of ’Committees or I · . · .

Cabinet itself if that Minister should be absent. . . \ '

Under Malcolm Fraser there has been an extension of the Cabinet

Committee system. Equally there has been an extension of the

opportunities for private Parliamentarians within the party

room and Joint Party Committees to influence Government policies.

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It is unfortunate that Andrew Peacock did not find himself

able to continue to work within this very democratic environment

- through whichr the -functions of Government are exercised in - . = ■ j -· · · ·

j · '


However, he will continue to be able to play his role in the

party room and in the Parliament and I believe he wil* *l do so.,

Otir 1 universal concern is that the policies and direction

, that t h e ·Liberal/National Country Parties are setting for

Australia are the only effective ones to ensure adequate '

social,v economic and political development and stability of

this country. ' -

That the Government is. intent on getting on with the job is

v vJti· reflected in the other two major policy areas for the w e e k .

. “ ■ H '

'■ ' . ·

The Health statement brought down by my colleague, the • · · ' * ■ , i « /

'Hon. Michael MacKellar, Minister for Health, on Wednesday,

and the Prime Ministerial statement on the Committee of

Review of Commonwealth Functions, both clearly show the

philosophic direction of the Federal Government.

• The tax rebate available for membership of medical and

. hospital contribution funds and the return to the States

of full responsibility for administering Australia's

. ' hospital system indicate this.

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• >

It is essential that the user accepts responsibility within

the health area as much as in other areas of our society.

Ttie^health^proposals nonetheless will protect those with .

the most need: pensioners with a PHB card and individuals

with less than a prescribed level of income - and provide

necessary medical and hospital care for them.

Through tax incentives and the changed availability of

Commonwealth' benefits, all Australians, have a direct ^

incentive to join a health insurance fund. The major ,

responsibility in the health area~will revert.:to the State

Governments.. M o s t , I suspect, will introduce fees for

services at public hospitals.

The increase to $28 per day of the Commonwealth subsidy for

surgical beds in private nursing homes will help to ensure

greater equality in opportunity between the public and private

hospital systems.

The health package seems to me the only possible way to achieve

reasonable availability for medical and hospital attention on

the one hand, and a containment of the astronomic expense to

Government of providing these services on the other.

The second major, policy announcement this week even more

fundamentally expressed the Coalition Government's attitude

towards Government itself.

Year by year there are many requests to expand the area of

Government involvement in the affairs of the citizen. , The

.creeping growth," of -bureaucracy has "been- of "major 'concern

yet there have been few occasions when any significant attempt

has been made to restrain it. ·

The Review commissioned by Prime Minister Whitlam and chaired

by Dr. Coombs provided for financial cuts across a range of

areas of Government. commitment.

The Objective was to re-direct Government expenditiire, ·

not to contain it. '

■ ■ . . ' . · t

The Lynch Committee has had as its objective not only the

reduction of Government spending but a philosophic commitment

to reduce the level of Government involvement in the lives

of individual Australians. * .

The Committee1s terms of reference w e r e :- , .

* whether some Commonwealth functions can be taken over or

sold to private enterprise. ■

* whether we can reduce or eliminate regulations imposed on *

private, commercial and individual activity by the - .

Commonwealth. . · . , , -

* whether the States can more appropriately and efficiently

handle the functions and responsibilities now undertaken ■

by the Commonwealth alone or in sharing with the States.

* whether generally Commonwealth functions might be reduced,

^perform more efficiently, or be eliminated altogether. . .

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The result, I believe,


will lead to stronger and more effective

S1112s|! . ' · ' .

It will ensure there is no undue involvement of the Federal" <"

Government or duplication of the functions of other governments

in the Australian community.


The decisions in fact embrace a collection of many steps

.towards reduced Commonwealth involvement. .

Some,-like the abolition of the Prices Justification Tribunal,,

have attracted more attention than the smaller ones. .

In my own area, the abolition of the Australia Post Courier

"Service does not mean that the Post Office will withdraw from ■

providing an express parcel and letter delivery, but that the

. small percentage of goods presently carried in direct competition

with private carriers will no longer be handled by Australia Post.

~ The inquiry'into the operation of Telecom is not intended to

prejudice the continued operation of this, the major Australian

employer, next to the Government. ' ' ' /

It is intended to ensure its maximum efficiency and the . '

utilisation of private sector capital and know-how in the ·

rapidly changing technology applicable in the communications


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In the broader sense and in direct relation to your calling

is the size of .the public, sector borrowing requirement and

Iteaasg&f \~the· efforts .needed ‘to reduce this... _l_. -L-> i - . .-- S ' * ·

We have achieved considerable success in reining in the

Commonwealth's budget deficit and this year for the first

time in seven years a domestic budget surplus is .'in prospect.

However, financing of the Commonwealth budget deficit is only

part of a total public sector borrowing requirement in ,

Australia·and it is the total size of this requirement which

is of considerable importance. ■ . ■ . .

The borrowing requirements of semi-government authorities

represent a similar call and as great a call on our capital

markets as does the raising of funds for the domestic budget

deficit financing.

At the same time interest rate pressures arise as these

government and semi-government calls for funds compete with .

the growing private sector.

Rate levels at the moment directly increase from the struggle

for funds between the private and public sectors.

The rapidly expanding private sector's call for funds to

finance its expansion must not be hindered.

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So restraint therefore must be effectively applied over the

size of and growth in the public sector's demand for funds.

' ■ — _____ .

— - As---the Treasurer * said recently, '"The best contribution which ■ —

all Governments in Australia can make to the cause of lower

interest rates is to reduce the amount of money they and their

- agencies borrow on our capital markets."

- At the same time there are many infrastructure developments

dependent on public sector investment.. These range from power

supplies, to water, roads and community facilities. .

A difficult decision lies in relating the need for funds ,for

these projects and equally funds to finance the provision of

telephones to service expanding business as against the private

sector demand for funds to finance its development. ,

. · s

Just how large the requirement for funds drawn from the .

- Australian capital markets over the coming decade will be,

must not be underestimated. I

I want to emphasise how the Government continues to work to

reduce the borrowing requirement of the public sector with

a few figures that show that in 1973/74 the borrowing

requirement of public authorities was 1.6% of Gross Domestic

Product. The next year it had jumped to 5.7% of GDP and

peaked a couple of years later at 6.6% but is now down to a

projected 3.5% this financial year.

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This reduction has mainly been due to the lower call being

made to finance the Commonwealth's own budget deficit and by

' __ last-^financial "year ;""-l979/80 , r the - total borrowing by - local and · * ' ·

_stater authorities’exceeded thes.Commonwealth’s borrowing > · f»w. <

requirement for the first time ever. ·

In my own portfolio area, an exercise was carried out to

. . . establish the estimated capital expenditure by Communication

authorities in the coming decade. ' .

... ■ * v ' ' 1 . ' ■

At constant 1980/81 prices the authorities Telecom, OTC,

Australia Post, the ABC and the satellite authority, will' .

require over $14,000 million if they continue at present , -levels of capital expenditure. At outturn prices that added

. ' up to over $21,000 million with Telecom of course making up

- just on $20,000 million of this. ' . " .

All the authorities except Telecom are required to provide

their capital from revenue. When we look at Telecom's past

record it can be seen abopt a quarter of its capital has .

historically been raised in the capital market, so on these

estimated figures Telecom could be making a call of something * x.

around $5,000. million i n ■competition with the private sector-

over the next 10 y e ars. . .

This then is one obvious reason why we are. having a hard look

• at Telecom in the current Review. ■

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The Government is, as I said, committed to reducing the size

of the public sector borrowing requirement and shall maintain . -7· . '

. -continuing that-the· current downward trend

-isnmaintainedT^Without’ -this - commitment' it-is -abundantly clear

that interest rate pressures and the generaj. availability of

funds being reduced, could affect.seriously the rising private

sector activity-and its growing demand for funds.