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Speech on the Treasurer's statement on government expenditure, personal taxation and revenue 1979-80



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MINISTER FOR EMPLOYMENT AND YOUTH AFFAIRS

The Hon. Ian Viner, MP

56/79

SPEECH ON THE TREASURER'S STATEMENT ON GOVERNMENT EXPENDITURE, PERSONAL TAXATION AND REVENUE 1979-80

Mr Speaker, this Government was elected on the promise of bringing back responsibility to economic management, of bringing a sick Australia tired of Labor excesses back to economic sanity.

We have not faltered.

Our over-riding promise to Australians was and is to restore economic growth.

Last Thursday's statement by the Treasurer is a mark of our responsible economic management. I believe that Australians generally see our new measures in this context.

Competent administration carries with it the responsibility to take tough options — and to take them when they are necessary.

As the Treasurer told the House last Thursday:

'No Australian Government in the post-war period has pursued expenditure restraint with such zeal and success as has this Government. We have maintained this course as a fundamental article of faith and will continue to do so'. 1

No Australian will forget that when we came to office in 1975 we were faced with a set of economic problems far more severe than any experienced previously in the post-war period.

We faced the problems of coping with the aftermath of a Government vyhose expenditure was completely out of control, a Government which had slashed tariffs, squeezed profits and caused a wages explosion. .

The inevitable outcome was spiralling inflation — this is the fundamental problem — and this led to a sharp rise in unemployment, because

. firms were less willing to invest because of the uncertainties created by higher inflation;

. households also curtailed spending in the face of higher inflation;

. the higher rate of inflation in Australia vis-a-vis our trading partners weakened the competitive position of private enterprise, with the result that imports achieved substantial gains on most domestic markets. Exporters also suffered from this reduced competitiveness — manufactured exports, particularly, declined sharply after 1973/74;

. the combined effect of sharply rising wage costs, indiscriminate tariff cuts and weakening demand led to a sharp decline in business profitability;

. private enterprise was left with no alternative but to reduce employment. *

There is a mistaken belief in many places that the fight against inflation is separate from the fight against unemployment. ,

The reverse is the case. There can be no real and lasting security for jobs as long as inflation is out of control.

The fight against inflation is an essential part of the fight against unemployment.

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To show this is a bipartisan view of the link between inflation and unemployment, let me quote the Leader of the Opposition in his Budget speech as Labour Treasurer in August 1975:

"Our present level of unemployment is too high. If we fail to control inflation unemployment will get worse."

"In the context of an economy beginning to pick up, a deficit of the order initially projected would have been a prescription for accelerating inflation. Its acceptance would have been tantamount to abandoning concern with inflation, discarding our wages policies, condemning the corporate sector to an attack upon its profitability and threatening the future jobs of thousands of Australians — all at a time when the first signs of improvement in most of those respects are beginning to appear."

"Today, it is inflation itself which is the central policy problem. More inflation simply leads to more unemployment."

This Government has consistently adopted the position that sustained economic growth and a return to more satisfactory levels of employment are not possible unless the problem of inflation is overcome.

That is why we have continuously sought to: ,

. reduce the rate of growth of Commonwealth outlays.and reduced taxation; this has eased the pressures on the private sector through increased taxation and public sector borrowings;

achieve more moderate and stable growth in the money supply;

. consistently argued for wage restraint in an effort to ease the burden of wage costs on employers. The Commonwealth Government has consistently argued for wage restraint at National Wage Cases and elsewhere.

We have maintained this resolve to restrain expenditure, to lower inflation and to lower taxation more than any other government in recent history. The measures taken last Thursday were necessary to ensure that renewed inflation would not result as a result of an increasing deficit. The decisions to maintain taxation at its present level and to restrain expenditure were not easy ones.

But they were necessary to re-establish — re-affirm — and reinforce the Government's policy to resist inflationary pressures which are re-emerging in the economy and to bring down a Budget which is responsible and allows Australia to live within its means. There was a responsibility to get it right now and not wait.

However, our approach to budgetary restraint has been fair and equitable. We have ensured that those people in need — the aged — the disadvantaged — the handicapped — maintain their benefits. At the same time we have taken strong measures and will continue to do so to ensure that Commonwealth spending becomes more effective and more efficient.

We have maintained these principles in the operations of the employment area. For example, we have introduced measures for the Special Youth Employment Training Program to ensure that those young people who are most disadvantaged — who have been unemployed for 4 months and who could not have obtained a job otherwise — are those we are helping through our SYETP program. In times where the Government must contain its expenditure we have a duty to ensure that the money it spends

is being spent wisely and well.

In the weeks ahead we will tighten up our procedures to ensure that unemployment benefits are paid to those who are genuinely seeking work. It is our aim to ensure that those suffering hardship because of the lack of employment opportunities are protected, but at the same time — for the benefit of Australians as a whole — we need to ensure that those who are not genuinely seeking work should not be supported by the community.

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Apart from its policies designed to ensure a lasting recovery in the demand for labour the Government has also acted to ensure that the labour supply is as well placed as possible to accommodate the processes of recovery and to help the unemployed. The Government has introduced a range of manpower and training programs to ensure that demand for particular labour

skills can be satisfied now and during the recovery phase and maintain and improve the chances of . the unemployed — especially our young unemployed — to obtain work.

Together these programmes will cost some $180 million this financial year and will help over 200,000 people — many of them young people. Since coming to office more than 400,000 Australians have been assisted at a cost of more than $400 million. That's an investment in people not matched by former Governments.

We maintained the National Employment and Training Scheme (NEAT) in its essential form, and introduced the Special Youth Employment Training Programme, the Community Youth Support Scheme, the Education Programme for Unemployed Youth, the Relocation Assistance Scheme and the Commonwealth Rebate for apprentice Full Time Training, and these measures have been successful.

Let me remind Honourable Members of what happened to employment during the period of the Labor Government. Let me quote a few figures: In June 1974 registered unemployment stood at less than 80,000. Twelve months later registered unemployment had reached a quarter of a million people.

Let me repeat just some of the monthly details during this period. In August 1974 unemployment had reached 107,000; in September it was 121,000; in October 150,000; November 181,000; December 267,000 and in January 1975 it had reached 312,000 people.

Although the rate of growth of labour costs has moderated substantially since that period, labour costs are still high, and firms in most sectors of the economy have attempted to maintain profitability through extensive rationalisation of product lines, increased mechanisation and labour-saving technological advances. So, even among those firms which have recovered strongly since the onset of recession in

1974, employment has not increased to the extent which may otherwise have been expected. This is the hangover from 1973/75.

But our achievements since 1975 have placed us on a much firmer competitive footing than was the case in the period leading up to the Labor created recession.

Mr Speaker, I note that some of the more imaginative of the Members opposite have attempted to draw a contrast between the Treasurer and myself on the employment situation. There is none. I have made no specific forecasts of the levels of unemployment in future months. There are too many variables and uncertainties associated with making such a forecast. It depends for example on the

participation rates in employment which have varied in recent years. Further the Government has often pointed to the relationship between higher wages, loss of employment opportunities and higher unemployment.

The Conciliation and Arbitration Commission decision in the current National Wage Case will have an important bearing on the employment prospects in the next few months.

I have been cautious in pointing to the favourable trends which have emerged in employment figures in recent months.

At the same time, we have seen hopeful signs of economic recovery and signs of an increase in business confidence. I have consistently pointed out that the only answer to concern about unemployment is a sustained growth in employment. Only economic growth can produce the necessary jobs. It is for this reason I have continued to stress that 1979 is a critical year.

Under the present Government's policies employment growth has been achieved. The most recently available data, seasonally adjusted, for March 1979 shows that there were 4,762,900 persons in civilian employment. Civilian employment has increased for 9 months in a row.

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Furthermore the growth in civilian employment in seasonally adjusted terms, has been concentrated in the private sector. Employment in the private sector now stands at 3,257,700. This represents a rise of 42,100 in the 9 months to March. Employment in the manufacturing sector in the same 9 month period rose by 13,700.

Such growth could only be achieved in a climate of business confidence, and indeed surveys conducted since the last Budget have shown that this confidence exists and is growing. For example, the most recent Bank of New South Wales/Confederation of Australian Industry survey showed that for the first time in 6 years a majority of manufacturers reported general business improvement in

the last six months and more manufacturers were planning to boost capital expenditure. This confidence is further demonstrated in decisions by a number of major international companies who have announced significant investment decisions not only to meet the requirements of the domestic

market but also for exports.

At a time when inflationary pressures are re-emerging it was essential that the Government take action to restrain expenditure and contain the deficit. We are determined to preserve business confidence and to maintain the gains that had already been made in employment. That meant

taking action now. The nexus between inflation and employment demanded that this was done.

Mr Speaker, I would like to take a few minutes to comment on the profligate, scatter-gun, differing employment schemes of the Opposition. The Leader of the Opposition and his employment spokesman, the Member for Port Adelaide, put forward job creation schemes at a Conference in Adelaide only ten days ago.

The Leader of the Opposition brought forward a scheme to establish a Community Service Corps on a voluntary basis at a cost of the order of $300 — 350 million. At the same time the Member for Port Adelaide suggested an additional scheme based on the Canadian Local Initiatives Programme, again for 50,000 people. This was an even more expensive programme costing about $500 million. The Opposition has not learnt from its experience in Government, its members continue to suggest

overlapping, confused and extravagant schemes.

I am told that the Leader of the Opposition outlined his scheme to the Conference without the knowledge of his employment spokesman. . .

Mr Speaker, it is another case of the right hand not knowing what the left is doing.

Still not satisfied the Leader of the Opposition, has also proposed a scheme to increase capital spending by $450 million to create 40,000 jobs.

To increase the deficit at this time by $1,400 million would simply put us back to'those high inflation days with ballooning deficits which destroyed business confidence and took away jobs by far more than they created. The only other way the Opposition could fund its extravagant schemes is through higher taxation.

Let me say again, it is only through re-establishing confidence in the private sector that future employment will grow.

The gains this Government has made have been hard won. This Government is determined not to lose these gains through weak and inappropriate economic policies.

The measures taken last Thursday continued our responsibility to constrained and sensible economic management. It was necessary to introduce these measures now to ensure that a responsible Budget could be brought down in August for 1979/80. .

For future employment prospects a responsible Budget and responsible economic management is essential. That is what the nation requires. That is what will be done by a Liberal-National Country Party Government.

HOUSE OF REPRESENTATIVES

29 May 1979