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Australian Government policy towards states

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Speech, E. G. Whitlam. 10 May 1973

The following is the text of an address given by the Prime Minister, Mr Gough Whitlam, to the Premier’s Conference in Canberra:

Our meeting must inevitably be regarded as one of the most significant of all Premiers" Conferences. It is likely our actions and decisions here will affect the relations between

the Australian Government and the States for years to come. I say this in a thoroughly matter of fact way. I do not want to create any portentous atmosphere. There can be no doubt however, that political, economic and constitutional events this year combine to make the 1973 Premiers’ Conference outstanding in its interest and implications. It is outstanding too, in the expectations which I believe the Australian people have of it and of us. Unless I misjudge them, they expect from us something more purposeful and lasting than a wrangle about the carve-up of this year's available finances — though

certainly we are here to determine the allocation of those resources and it may even be we shall have disputes. We have common interests: we have conflicting interests; this is a working conference and we shall each, I trust, seek to promote our respective interests in workmanlike fashion.

This is not the occasion for me to go into any lengthy explanation of the National Government’s, programme; still less the philosophy behind the programme. As this however, is our first financial meeting, it is fitting that I should state some broad principles which this Government brings to its relations with the States.

The National Government now has a range of responsibilities barely glimpsed at the time of the Federation, or at the time of the Financial Agreement of 1927. or when the Grants Commission was established in 1933, or even when Uniform Taxation was introduced in 1942. You would properly point out that the activities of State Govern­

ments have been very much enlarged in that time. The people have come to expect and to need a very much higher range of activity and achievement from their elected governments, at all levels. The expansion of public functions has been accompanied by a growing disparity between the sources of public finances. The States and their creations are responsible for just over half the public spending. They raise between them just under one quarter of the national receipts.

The most important reason for this disparity is the operation of uniform income taxation. These arrangements have now applied for over 30 years. We regard these arrangements as a permanent and settled feature of public finances in Australia. I believe that, for all practical purposes, it is the settled policy of all parties which can form

National Governments in Australia, and the settled view of the overwhelming majority of the Australian people. There is equal agreement that the National Government must provide assistance to State and local governments to enable them to finance adequately and fairly the functions which fall to their responsibility. Therefore the total funds allocated by the Australian Government for these purposes will have to be increased. This

is common ground, I believe, between this Government and its predecessors, and any conceivable successor. For this Government, however, the point of departure from past practice is the degree of the National Government’s involvement in the planning of the functions for which it helps provide finance. ' From now on, we will expect to be involved in the planning of the function in which

we are financially involved. We believe that it would be irresponsible for the National Government to content itself with simply providing funds without being involved in the process by which priorities are set, and by which expenditures are planned and by which

standards are met. ”

We believe that the Government responsible for gathering and dispersing huge amounts of public money is obliged to see that the money is properly spent. We believe that most of the problems with which allocations from the National Budget are meant to deal cannot be confined to or defined by individual States. We believe that the provision of National Government assistance must be based on comprehensive in­

formation on needs and resources and expert analysis of that information — information I believe, which should as far as possible be made public before decision. The Australian Government has already taken steps over a wide range of matters to provide itself with better information and to see that the public has access to that information. We expect better informed debate and better informed decisions. Let me i stress that this is not a matter of unilateral initiatives and action by the National

. Government. Rather, we are trying to open up new and fruitful fields for cooperation ' with the States. '

Let me mention four matters at the heart of this Government's programme — schools, hospitals, cities and local government. Interim committees have been established · to begin the work which will be undertaken by the Schools Commission by the Pre- ; Schools Commission, the Technical Education Commission, and by the Hospitals ; Commission. A Cities Commission has been established to continue and expand the work ' that had already begun under the National Urban and Regional Development Authority -J which it will replace. The Parliament has passed a new Grants Commission Act which \ authorises the Grants Commission to enquire into applications for assistance by regional: organisations of local Government as approved for this purpose by the Minister for ‘

Urban and Regional Development after consultation with the States. Any assistance ; recommended by the Commission and accepted by the Government will be paid to the'J States as Section 96 grants to be passed on to the local government organisations!* concerned. All these bodies will of course, be depending upon the States and their S authorities to provide a good deal of the information they will be seeking. i.T

In a word, we are trying to build machinery which will provide all our governments 3 with better information and enable all our governments to make better decisions. There;)* are three further important points that I should make clear. First, when 1 speak about^ the need to work more closely together in the planning and determination of expenditure j* programmes and priorities. I am not talking only about expenditures that might be i{

financed under new arrangements introduced, such as for urban transport, sewerage and 3 so on. That would be confining cooperation to cooperation at the margin. If, for example,''-j we are to make real progress in reducing the problems of people who have to live in cities — much closer cooperation is needed over the whole range of planning and development "‘ij of our cities, old and new. We have to try together to ensure that all the resources being

invested in our cities by all parts of the public sector are deployed to the best advantage. The total resources available are not unlimited, and we need to strive to have them used as effectively and efficiently as possible. -.4

Secondly, while we are prepared to see a substantial net increase in the funds flowing ·â–  ; from the national budget to the State and local government sector, it should not be. >; assumed that this can be simply a process of increasing amounts being paid under existing ' < arrangements or of introducing new· supplementary arrangements. Where the National <

Government undertakes new or additional commitments which relieve the States or their ^ authorities of the need to allocate funds for expenditures at present being carried by .3 them, there should be adjustments in the financial arrangements between us to take v. account of the shift of new financial responsibilities. These adjustments will normally ~"-

take the form of appropriate reductions in the general purpose funds allocated to States, We have proposed such reductions, for example, as part of the programme by which the v Australian Government will assume financial responsibility for tertiary education. Thirdly, Premiers will be aware that the Australian Government is already com-

mined to a wide range of specific programmes which will involve, in one form or another. assistance to the States. A number of them are listed for discussion later in this Con- ■·/, ference. The point I wish to emphasise here, however, is that these programmes must >· be introduced and carried forward in a planned and coordinated way. We must have

regard to the possible relationships of each programme to other programmes and to any effects which there might be on the States' own finances. We must also, of course, fit ,H these programmes into our overall expenditure plans which must, in turn, be determined .;

in the light of general budgetary and economic circumstances. To put the matter another.';: way, the Australian Government is committed to a general policy of improvement in Λ public services and to a number of specific programmes to effect that improvement. We*.-3 did not, however, commit ourselves to do everything immediately and all at once. Nor':;;· can our programmes be achieved without adjustments in the use of resources in other areas. The timetable for the introduction and implementation of these programmes ha*;-·

lo allow for adequate preparation of such programmes within the economic management;-;:· context. "4 ^*

To put it bluntly, each of us has to make tough decisions about priorities this ye*r-^ijr We have to make them within the context of the existing economic situation and some, ·>,

of the strongest features of the economy are going to make those decisions all the more difficult. The economic situation is clear-cut. Demand is running high. Growth is proceeding apace — it has been a very long time since the economy has exhibited such robust growth. The remaining slack in the economy, already small, is being rapidly taken up. In some sectors, pronounced signs of strain have appeared. I do not need to run through all the economic indicators to illustrate these points — they are evident enough to those who watch them. But one or two of the key figures are quite striking, and oarticularly worth drawing attention to.

First, as to demand: Consumer spending has shown a marked acceleration. In the recent March quarter there was growth at current prices at an annual rate of 14 per cent and at constant prices of 8 per cent. These are well up on past rates of growth, for example, in 1972-73 the rises were 10 per cent at current prices and 3 and a half per cent at constant prices.

There has been rapid growth in the housing sector. Private housing commencements in the first three quarters of the financial year just ending totalled 11 2.000, a rise of 16,000 or 16 per cent over commencements in the same period of 1971-72. Other private fixed investment, which had been on a declining trend for some time, apparently bot­ tomed out in the March quarter. The resumption of a rising trend here would remove a restraining influence which has been operating on the economy until now. Meanwhile, export demands continue to be very strong. As to growth, I need only say that the rise

in non-farm product at constant prices between the September and March quarters of this year — 5.9 per cent or an annual rate of 12 per cent — is the highest on record for a six-monthly period. That, of course, is the nub of our problem. Growth as such is to be welcomed —

indeed, it was a major plank of the policies on which the Australian Government was elected to office. But we need to be very wary lest, in the present expansive situation, strong demands from the public sector do not push the economy so hard against the ceiling imposed by available resources as to give a further major impetus to an in­

flationary trend already running far too high. The Australian Government is pledged to institute wide-ranging needed reforms which will, necessarily, enlarge the call made upon resources by the public sector. In the situation which confronts us, we must approach our task in a planned and orderly way. With so much to be done on so many fronts, it is essential that priorities be set with the greatest of care. In saying that, I am not for a moment implying that there are not many areas of State spending which deeply affect the welfare of the people. Of course there are; but it is equally germane to the welfare of the people that, in the present situation of strongly rising private demands, we make the strongest possible efforts to ensure that the demands of the public sector do not overstrain available resources and add to in­

flationary pressures. Let me stress that I do not propose that the problems of economic management, for which the National Government must accept the ultimate responsibility, are to .be solved at the expense of State Governments. Nonetheless, in the general review of

priorities and the general sharing of burdens which must shortly take place when we come to draw up our respective Budgets, the Australian Government will not be able to shoulder the double task of social priorities and economic management alone. As a result of the work of the Task Force under his leadership. Dr Coombs has given

me his report on the spending commitments of previous governments. With that in mind, we shall be undertaking in a few weeks' time, probably the most radical review of Government spending and taxation subsidy programmes ever undertaken by any Government in this country. We must do so if we are to keep faith with the Australian

people, who gave us a mandate for a clear programme. My colleagues and I have to balance political risks and economic dangers — we shall do our share; I have no doubt you will be equally willing to do yours. I do not for one minute imagine that at this conference we can work out all the social

or economic or political priorities. This should demonstrate — to the public as well as ourselves — the inadequacy of existing structures for truly constructive, truly cooperative. Federalism. It is not good enough that the whole framework of your Budgets and so large and crucial a part of ours, should be determined from year to year in two days of open discussion and perhaps two or three nights of rather less public dealing. We do not do the right thing by ourselves, we do not do the right thing by the Australian people, if we so limit our consultation and cooperation. In this sense, therefore, I would hope that this will be both the last of the old style Premiers' Conference and the first of a new type.

I should in this context, say that our understanding of the States’ financial positions has been helped by the information supplied to us by the States. I would like to thank the Premiers and their officers for their cooperation in that regard. May I express the hope that our next meeting will be the culmination of months of continuing and con­ certed consultation involving our colleagues, our officials and ourselves. I expect that our continuing consultation will then be better informed by our institutional arrangements

including the Commissions to which I referred earlier, which the Australian Government is setting up. I trust that today, we come together not as six Premiers and a Prime Minister in search of a headline, but as seven Australian leaders to do our best for all the Australian people — and when we next meet we will be even better equipped to do so. ’