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Speech to Parliament - 1979 Budget



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J j. AUSTRALIA,,^

PRIME MINISTER

FOR MEDIA TUESDAY, 11 SEPTEMBER 1979

SPEECH TO PARLIAMENT - 1979 BUDGET

This Budget maintains and reinforces the on-going strategy that we've pursued.

It presents with candour and detail, warts and all, the shape of things in 1979/80 as we see them.

It's not a question of expediency. It's not a question of short-term popularity. It is a question of consolidating and strengthening Australia's economic recovery so that we can have a firm foundation for the future, for the 1980s. . .

We still have some major economic problems to confront. They partly reflect some international developments, partly distortions that we inherited and which three and a half years later still, in part, besets the economy.

The world economy itself is troubled and inflation, as the Treasurer has made plain, is accelerating quite rapidly - too rapidly, in a number of OECD countries. And in many, their' economic growth has slowed down.

World trade is likely to remain sluggish as a result. In the United States output is actually declining. That means that there is an even greater need for Australia to conduct her own affairs in a realistic and clear-headed manner. The

tighter we can run our economy, the better we can run our ship, the better we can get through a difficult international economic environment, the more we can advance. We are establishing the circumstances in which we can do that because of the strategy that has been applied over the past three and a half years. As a result of that, we are much better equipped to do so than might otherwise have been the case.

The strategy that we have followed has already been vindicated. Civilian employment in the year to June 1979, compared with a year ago, is up over 64,000.

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It is worth noting that the number of full-time unemployed is 18,000 fewer than a year ago. And how many people out in the countryside are aware of that? Because so often it is reported that unemployment is rising and continues to rise, but on the Bureau's figures unemployment is 18,000 less than a year ago; reduced from 6.2% to 5.8%. While we can't make too much of that, it is an encouraging trend and one which we intend, through our policies, to build upon.

Profitability is up although it can be improved even more. Inflation is down substantially from the 17% of Labor's years to around 9% - higher than we like, higher than we believed this time last year. But we all know what's happened

since. We can understand that those inflationary pressures that have put a hiccup into the downward movement of inflation in Australia have had the same effect, and a worse effect,

in many countries overseas.

On an annualised basis the United States' inflation is now running around 14%. The United Kingdom, on the latest figures, around 22%. The OECD area as a whole 12.9%. Australia around 9%. So the margin in the favour of Australia is

increasing. That means our industries become more competitive. That means our exporters can do better. That means the Australian economy is strengthened and that's good for Australian employment.

Two years ago, my colleague the Minister for Defence, brought a Defence proposal to the Government to buy a major replenishment ship for the Navy. A cost of $70 million or $80 million going to an overseas firm. The best overseas was a French tenderer. We as a Government said: "Look, we'd

like to give Australian contractors a last chance. Go back to the Australian contractors. See how much subsidy might be involved to get that particular ship built in Australia". Our colleague was able to come back and only a short while ago

announced that the tender had gone to an Australian firm.

No subsidy at all was required because the Australiam firms undercut the best overseas tender available to the Australian Defence Forces. That's the kind of result we want from our policies: having Australian industry being able to go out and compete and get into business which some time ago we thought was beyond our reach.

We are exporting again and in the 12 months to June of this year, it is over 20% on the same period in the previous year.

Australia is again recognised internationally as a good place to invest. Private investment in the last financial year was almost the best for a decade. That again, is a result of the policies that have been applied rigorously by this Government over three and a half years.

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There are now a large number of major mining and manufacturing projects in Australia - over $13 billion worth firmly committed or in the final feasibility stage. In the alumina/aluminium smelting industry alone - $4 billion worth. And that means jobs right around Australia. In coal - $2 billion worth. That means more jobs right around this country.

There has been international praise for Australia's steadfastness and success. The OECD compliments Australia on its economic policy and we are one of the few countries over the last few years that has been able steadily to improve

international competitiveness. That again, is as a result of our policies.

But we can't hide the fact that there are some undesirable aspects, there are some dangers, in this year ahead of us.

The downward trend in prices has been interrupted, as we know, and for reasons that we understand. There are new dangers produced by international developments; upward pressures on oil prices, on beef prices and on some metals. But we don't

sit back. We don't blame adverse overseas developments. They are a fact of life and we have to meet them. We face them and devise a strategy to minimise the damage and improve Australia's competitive advantage compared to other countries. That is just what we've done.

But compare that with the attitude of our predecessors when they were in office. They inherited an economy with inflation running about 5% below the OECD average. Then, during their term, they increased inflation to 17% - 5 points above the OECD average. That was as a result of their policies over

three years. .

Now, in the latest six months, Australia's inflation is significantly below the average of advanced countries and we intend to keep it that way.

We need to remember that Labor compounded the inflationary problem by quite deliberate policies of its own. Commonwealth outlays increased successively by 20%, 46% and 23%.

Let's look at health - the area under the control and charge, first of all, of the present Leader of the Opposition, and then, presumably, he kept a fatherly eye on it when he was Treasurer. But the escalation of costs in that area, where he was under control in one form or another, was 21% in 1973-74.

37% in 1974-75 and 114% under his Budget, under the Leader of the Opposition's Budget. Now that shows, I think, that his area of direct interest was one of those areas that contributed most to inflation, most to an increase in outlays in a quite exhorbitant and unreasonable fashion. We need to understand that in

the area allegedly under his control, costs were quite patently out of his control. My colleague, the Minister for Health, has re-established control over health finances in a very praiseworthy way over the last three and a half years.

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It is worth noting that the Leader of the Opposition would do it all again because he said he would restore Medibank as it was, and that would cost $600 million and the cost escalation would be off again - no concern for the deficit, no concern

for its consequences for the Australian economy.

But then look at what happened in wages policy, again compounding the world inflationary pressures. In the year to March 1975, up by 38% in one year alone. Was it any wonder that Australian industry had some difficulty in employing. Any wonder that

they had some difficulty in producing and selling, and providing jobs for Australians.

If we look at our Budget, we find that the Budget builds on the achievements of the last two to three years. It responds to emerging dangers in the world economy. It is anti-inflationary: maintains and enhances the competitive gains for Australian

industry; and establishes rigid controls over Government spending for the forthcoming year which will be about 9% - about the same as inflation.

Since 1975-76 I think it's worth noting that total Government expenditure has basically been held constant in real terms - growth under 1% a year in any case. In the three years before that, expenditure grew by 10%% in real terms and in the years before that by nearly 5% in real terms. So this is, in a sense, the

first Government for a very long while - maybe the first Government in the post-war years that has maintained the kind of rigid control over expenditure that we have established.

Despite that, we have met major commitments in Defence, in social welfare, and in the development and support of Australian industries. How many people understand, back in 1969 there were 179 pensioners for every 1,000 people in the .

labour force. But in 1979 there are 284 for every 1,000 people in the labour force. Is it any wonder that the welfare bill has grown as a result of those figures?

I don't think anyone has ever advocated cutting income support to needy individuals. Because inflation was higher than we envisaged at the time of the last Budget, most pensions and benefits are again indexed twice yearly.

But we have gone beyond that. The income limit for pensioners for fringe benefits have been extended. Repatriation benefits have been improved and extended as I believe - this Government believes - they should have been extended to allied ex-service personnel. So we have met obligations in that area.

In defence, we are providing the extra $281 million, nearly 11% over last year in money terms, that has enabled us to lift the percentage of the defence vote going on capital equipment from Labor's average 7% to over 15% this year, so that we can

start to rebuild the infrastructure of the armed forces.

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That is a very necessary and welcome improvement. In industry, export expansion grants have gone from $20 million to $170 million, partly because there is a backlog in the bills owed. But also, very significantly, because that programme has been very much more effective than we originally thought,

and because Australian manufacturing industry has been much more effective in exporting and getting out into markets right around the world, than had'been thought possible, two or three years ago.

That again, is a commitment that this Government has met. So, we are providing for national goals in areas of social welfare, in defence and in support of industry. Despite that, we have been able to contain expenditure overall in the most

rigid way and reduce the deficit very substantially.

Mr. Speaker, the deficit is coming down to 1.9% of the Gross Domestic Product to under $2.2 billion - a very substantial reduction. The domestic deficit is coming down to under $900 million, less than half of last year.

I think we need to understand the implications of this for the Australian economy. It provides more scope in the private sector; greatly assists in the management of monetary policy. It will make it easier to find adequate private funds for investment and for housing. It keeps a downward pressure on inflation. It strengthens the Australian dollar and very greatly builds private sector confidence. "

People have only to go around Australia, into the business and financial areas, over the last two to three years and to the time since the Budget, to see how this Budget has built and extended confidence right throughout Australia. We intend that that be continued.

In addition, we have been able to reduce taxes. Whatever the semantic arguments might be about whether or not people should pay more tax when they have a higher income, the fact remains that on every dollar earned from 1 December, taxes will be lower. If additional dollars are earned, less tax will be paid on those additional dollars than would otherwise have been the case.

I think it's worth noting that in this year along, $4,000 billion less tax will be paid than if the famous Hayden scales were still in force - $4,000 million less.

Let's look at somebody on an income of $12,000. Under the Hayden scales he was on 45Φ in the dollar. He is on a shade over 33C in the dollar through this year. At $20,000 he was on 60Φ in the dollar under the Hayden scales. He is on a shade over 47C in the dollar. It's worth noting that after

1 December taxpayers on average earnings with a wife and two children are $20 a week better off as a result of our reforms, as a result of family allowances, than they would have been under Labor.

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In family allowances alone, we have provided $4 billion over four years of massive support for Australia's families — a major social welfare innovation introduced by this Government.

You only have to compare Labor's taxes going up 125% and to note that they've promised additional taxes on capital, on wealth, on national resources, increased oil levies, on a marginal income tax rate of 75Φ to 80Φ in the dollar, to know which Party is the Party of high tax, and which Party is the Party of low tax.

It is worth noting that the September issue of Syntec said that in 1980-81 we are going to have the unusual spectacle of investment inflow picking up here in the midst of international recession.

That is a remarkable statement. It is also a remarkable commentary on the Australian economy and the way it has been managed. Because virtually it is saying because of the management of the Australian economy we are attracting

investment to this country where other countries are not. Because we are keeping this country under economic control, we are going to have more activity here than many others.

The world is in trouble, we know, because inflation is too high and growth in economies is too low. But if Australia is going to come through it well, the strength and the heart of our policies is to keep a downward thrust on inflation; to improve Australia's competitive advantage over that in other countries;

to build opportunities in the private sector so that lasting jobs, real jobs, can and will be created. So that we can get this country moving again, as we are, in the major resource areas. That provides substantial jobs. Creating a climate

for private investment, and that creates substantial jobs throughout this country.

I have already mentioned $2 billion in coal, $4 billion in the aluminium industries. There is a private foreign investment in the June quarter approved of $1,400 million for prospective expenditure. That also, is people from overseas voting with their dollars, with their pounds - confident of the Australian economy. No other country has that kind of

reputation at this time.

The Labor alternative - well what alternative is it? I think we should have a look at it. It is worth noting that the Honourable Member for Gellibrand said at the Press Club none of the media took any notice of last year's alternative Budget and that's why there isn't one this year. What a wonderful reason for an abrogation of responsibility. Labor's

economic responsibility is equivalent to the square inches they get in the newspapers. They have no economic policy, no recognition of the central importance of anti-inflationary policies.

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The recent economic experience of the whole industrialised world drives home the lesson that policies which do not attack inflation., cannot achieve a return to sustained economic growth and the enhanced living standards which only that growth can

bring. Let me quote for a moment from comments by William Miller, Secretary of the United States Treasury and designated by President Carter as the Chief Economic Spokesman for the United States: "Inflation is a clear and present danger.

It has struck at our nation's vitality. If it not checked then it will threaten our democratic system itself. We must attack the root causes and totally eradicate the basic sources of the malady. What is needed is a comprehensive

and sustained and total war against inflation". I only wish we could find that total war more fully undertaken in a number of countries overseas.

But in 1975, the Leader of the Opposition, the present Leader of the Opposition, then said: "Today it is inflation itself which is the central policy problem. More inflation simply leads to more unemployment". Well, that was a true statement

then. Unfortunately in Opposition he seems to have forgotten that momentary exhibition of good sense.

Now, in Opposition, he seeks to ignore these realities and has placed no coherent alternatives before the Australian people; to sell Australian short. But even some Labor leaders have criticised economic policies. Mr. Wran called it a hotch-potch. Mr. Hawke called it a gutless sell-out to the Left.

Now what would Labor's deficit be? And it is worth asking yourselves this question. Doing a little analysis of some of their propositions. They said we would certainly support a larger deficit. And he makes no apology for that. Well, what about those Adelaide proposals - that nice, modest,

calm conference that seemed to go so well - reaffirming all the extremism of Labor and the Whitlam years: a national investment fund, national superannuation, national no-fault compensation; a national newspaper to print what they like to see; subsidies for political parties; abolition of staff

ceilings. How much is all that going to cost? Are they modest people - would it be $200 million, $500 million" $1,000 million? You could take your pick. Well, it might even be $2,000 million, but certainly we know it would not be a modest amount. But then, in the alternative Budget

that wasn't, there were going to be capital works. But how much? $200 million, $300 million? The Leader of the Opposition is silent about it.

He does give some figures for a Community Service Corps, which is his own discredited RED scheme which in his Budget in 1975 he abandoned. But that scheme would cost $600 million in a full year, not the $100 million - $40 a week for 50,000 people - that he tried to suggest. It is another example of opportunism. It would not create jobs. .

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Let us look at the consequences in a Labor State which has pursued this kind of policy. In South Australia, unemployment is 8.2% looking for full-time work against the national rate of 5.8%; that is the kind of result that you get out

of a Labor State, pursuing Labor policies. They are arguing about it at the moment. In South Australia, again, in the month of August, unemployment was up over 5,000, where in Australia it feel quite usefully during the same month.

If people want more of the stagnation of South Australia they only have to have Labor policies over the whole of this country. But I'm quite certain that people have more sense than that.

In addition to that, the Leader of the Opposition had another gentle sentence in about an employer subsidy scheme - one which hasn't really been analysed, which he just hopes will sound good, sound nice, sympathy for the unemployed, when

in fact it is a policy which will provide no help at all. A subsidy to employers equal to the rate of unemployment benefit for net additions to the workforce. You could only take that on a firm basis, on a company by company basis and all

the while, even if employment is static, there are many companies expanding their employment base and many others that would be losing because they just aren't doing so well.

On some estimates, the increase in employment in a number of companies and corporations would be a lot less than a quarter of a million right around Australia. This scheme would cost about $1 billion a year, $1,000 million for no real increase

in employment at all. It is a hypocritical scheme and one which seeks to delude the Australian public.

What would the deficit be under Labor? I don't think it could be less than $4 billion and might well be substantially more. But even if it were $4 billion, having to match those commitments, it would still depend upon very greatly increased

taxation in a number of areas, in wealth taxes, and the oil levy, in resources taxes, taxes that would be designed to destroy initiative and enterprise right throughout Australia and bring this country to a halt just as they so successfully did once before.

It is worth noting that these expenditure proposals are coming from somebody who was regarded - I don't know why - as a responsible Treasurer. But what would it be like after a bunch of Labor Ministers got at it around a Cabinet table. The expenditure would go up two or three times. They have no policy to control inflation, only a policy for disaster. That seems to me like Mr. Whitlam all over again.

There is no wages policy. No recognition of wages and the relationship with inflation. It is quite plain that they sold out to the Left at the Adelaide Conference. You don't have to take my word for that. You just have to take Bob Hawke's word for that.

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The same policies: there is a sentence which reads something like this: "With the understanding and co-operation of the trade union movement"(what a wonderful thing) "development and implement a policy which would encompass wages incomes, non-wages incomes, the social wage, taxation reform and the elimination of taxation avoidance

and which will achieve a more equitable distribution of our national wealth and income with a commitment to the maintenance of real wages by quarterly adjustment and the passing on of the benefits of the increases in productivity". That is the policy. But who is going to interpret it?

I think we also have the union movement interpreting it as it wants. The union movement have interpreted it over the last day or two in the most irresponsible wages policy of all time -- one which would add to the number of unemployed, a totally selfish policy. That is the interpretation and ' that's the interpretation that Members on the opposite

side of this House would be bound to.. Because we have Mr. Hawke's word for it that Mr. Hayden had a gutless sell-out to the Left. .

We got confirmation of that just a day or two ago. The confirmation comes from that great advocate of morality and moderation, Mr. Bill Hartley of Victoria. Now how does he come into it? Because he has attacked Mr. Hawke and defended Mr. Hayden in a journal called, I think, the Lone Star

or something like that.

But there he reveals the reason for the sudden wisdom of the Labor Party - the reason for the sudden insight into the needs of the union movement - the reason for the sudden sell-out to the Left. Mr. Hartley has made it perfectly plain that Mr. Hayden is listening to Mr. Roulston of the AMWSU and his

economic advice. That's why he is being sensible, says Mr. Hartley. Because he is accepting Jim Roulston1s advice of the AMWSU. I don't think anyone wants the AMWSU running

anyone in this Parliament. I think that might be the first public act of decency that Mr. Hartley has ever performed in advising us of the secret adviser to the Leader of the Opposition in economic policy.

Is it any wonder that Mr. Hawke called it gutless? Is it any wonder that Mr. Hawke called it a sell-out to the Left? But in this we are reminded of one thing - the great bond in common between Mr. Whitlam and Mr. Hayden - their capacity

to fight with Mr. Hawke.

Quite plainly, their policies are also against foreign investment. They will take action to prevent continuance of activities of trans-national corporations which are against the interests of the Australian public. Which activities, which companies? Are they going to hold the sword over the

head of all of them? How many people would invest or undertake new enterprises against that kind of threat? They want an institution to spy on trans-nationals, to provide the information to unions here and overseas. Again, that would

just send investment out of this country.

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He wants investment to go out this country. He doesn't believe in jobs for Australians. He doesn't want partnership with overseas concerns. He doesn't want to be able to provide markets for the export of our resources and primary products.

It is good occasionally to have the truth out of the Australian Labor Party.

But now what do they say about uranium? I don't want to say very much about this because others have said it all. But it is again Mr. Hawke who said the Federal Government, this Government, appears to have done all it could to obtain non-proliferation guarantees from customer countries - but

still South Australia and the Australian Labor Party hold up one of the greatest mines in the world. Because they are wedded to an archaic and stupid policy which is going to inhibit Australia's development and which is going to prevent Australia

playing the role which she should as an energy supplier. · .

But then again, let me say something for a moment about policy on oil. Mr. Hayden would abandon our oil policy. But what would he replace it with? Suggestions? Innuendos? He hasn't said. The Opposition opportunism and deception is nowhere more

apparent than in their attitude to crude oil pricing. They try to suggest that the motorist should get it for less. But then at the same time they try to suggest that the levy should be higher. They can't have it both ways.

There is no getting away from the fact that oil supplies are scarce. I am certain that the Australian public understand that. I'm sure that people accept that, even if they don't like it.

We can't delude ourselves.that Australia can enjoy artificially low oil prices simply because at present we are 70% self-sufficient Because beyond the very short term, that 70% self-sufficiency would fall very dramatically. An artificially low price would be a recipe for disastrous shortages a short while into

the future. '

Almost every industrialised country in the world has recognised that the days of cheap oil are over. Indeed, Australia still has lower petrol prices than, for example, Britain, France, Germany, Italy and many other countries. As we are recalling the words, I think, of the Leader of the Opposition when as Treasurer he announced the introduction of

a crude oil levy in the 1975 Budget. He said: "The low domestic price is not conducive to rational resource usage. Yet it does not follow that increases in the domestic price should be fully reflected in corresponding increases in prices to Australian producers". I would have though that that

is exactly the attitude which underlines the Government's policy. It is in fact the policy that has been pursued. It is an attitude endorsed by OECD countries, by the International Energy Agency and by the governments of most industrialised countries.

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Labor's current approach would mean the end of oil search and development. World parity pricing for oil is an essential part of conservation, an essential part of the use of alternative fuels. It is an essential part of the exploration and development of new fields. We intend to stay with that policy because it is the right policy

for Australia.

When you look at the Labor Party's economic policies, or rather lack of them, their policies against foreign investment, against development, the policies that would leave inflation running ahead once again, it is plain that the Labor Party would increase unemployment and end development and investment.

I don't really think we should have reason to doubt this. They did it once before to a greater extent and more effectively than anyone could have believed possible. Is it any reason therefore, to doubt their capacity to do just that once again. That again, would be Mr. Whitlam all over again.

In marked contrast to the Opposition's fantasies, the 1979/80 Budget which the Treasurer introduced was a simple and direct document. It is a marked contrast to the Opposition's blithe disregard for the inflationary consequences of its

alternative policies in the 1979/80 Budget that doesn't pretend that inflation can be solved by schemes which ignore the basic cause of inflation, or by devices which manipulate price levels but at the expense of intensifying underlying

inflationary forces.

Let no-one forget that one of the major dislocations of the mid-1970s, one which to some extent is still with us, was the huge increase in the share of income going to wages and the huge fall in the share going to business. Let no-one

forget that that catastrophe flowed directly from the policies of the Labor Government. Let no-one forget Labor's catastrophic inflation, and let no-one forget that the Labor Party is the Party that began high unemployment in

this country.

Let no-one forget Labor's destruction of the economy. We are repairing that economy, recovering from the disaster of Labor. This is a Budget for all Australians. We agree when Mr. Wran says the 1980s will be a boom decade for Australia. Occasionally, he speaks a little economic sense. This is a Budget that will steer Australia through a difficult

international economic scene and because we are running the Australian economy well, because our inflation is lower than that of many of our trading partners, because we therefore are becoming more competitive, even if world trade is low, and

even if there isn't much growth in the United States or Europe, we will be able to get Australia through a difficult world scene, much better than most countries.

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We will be able to get more than our normal share of world investment. We will be able to get more activity in this country because we can attract that investment. We will get more activity in this country because our industries are

becoming more competitive and reaching but into more markets in many different countries of the world.

We can only do those things if the economy is well run and inflation is kept under control. The Budget is confidently pointing the way to the 1980s. Under our policies there will be a decade of achievement, of stability, of social progress and of a better life for all Australians.

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