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NO. 33

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TREASURER

EMBARGO IMMEDIATE RELEASE

STATEMENT BY THE TREASURER, THE RT HON PHILLIP LYNCH, MP

STATE FINANCES ■ .

THE TREASURER, MR PHILLIP LYNCH, TODAY CALLED ON THE STATES

TO JOIN WITH THE COMMONWEALTH IN A SPIRIT OF CO-OPERATION

IN MEETING THE DIFFICULT ECONOMIC CONDITIONS CONFRONTING THE

NATION. . , . .

MR LYNCH WAS SPEAKING IN SYDNEY AFTER CABINET HAD CONSIDERED

THE AGENDA FOR THE FORTHCOMING PREMIERS* CONFERENCE. - . ·

ALL SPHERES OF GOVERNMENT HAD BROAD RESPONSIBILITIES TOWARDS

THE NATIONAL INTEREST AS A WHOLE AND MUST ACCEPT THEM.

THE GOVERNMENT'S FEDERALISM POLICY HAD RECOGNISED THIS '

APPROPRIATE DISTRIBUTION OF RESPONSIBILITIES AS AN

IMPORTANT OBJECTIVE. . "

THE TREASURER POINTED OUT THAT THE STATES TOGETHER WITH

THEIR LOCAL AUTHORITIES NOW CONSTITUTED SOME 52 PER CENT

OF TOTAL PUBLIC SECTOR OUTLAYS AFTER ADJUSTMENT FOR

TRANSFERS BETWEEN GOVERNMENT SECTORS.

2

s

IN 1976-77 COMMONWEALTH PAYMENTS TO THE STATES WERE

ESTIMATED TO BE NO LESS THAN $9 BILLION OR 37.3 PER CENT

OF THE COMMONWEALTH*S TOTAL OUTLAYS; COMPARED WITH

$1965 MILLION AND 3.1.6 PER CENT ONLY TEN YEARS EARLIER.

IN 1976-77 IT HAD BEEN ESTIMATED THAT BUDGET EXPENDITURES

BY THE STATES AS A WHOLE WOULD INCREASE BY SOME 15*9 PER

CENT; COMPARED WITH 11.3 PER CENT WHICH HAD BEEN ESTIMATED

FOR THE COMMONWEALTH BUDGET.

THE RELATIVELY FAST GROWTH IN STATE SPENDING REFLECTED IN

GROWTH IN NUMBERS EMPLOYED BY THE STATES AND LOCAL

AUTHORITIES.

MR LYNCH SAID THAT THE EMPLOYMENT PICTURE COULD BE SEEN

IN THE FIGURES WHICH HAD BEEN ADJUSTED TO EXCLUDE THE

ESTIMATED EMPLOYMENT UNDER VARIOUS UNEMPLOYMENT RELIEF

SCHEMES.

s t a t e /l o c a l SECTOR

COMMONWEALTH . SECTOR

°/o °/°

Average Annual Increase 5 years to June 1976 3.6 2.9

Increase in year to June 1976 4.0 - 2.0

Increase in year to -

November 1976

, ■■

3.3 - 3.0

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IN 1976-77 THE COMMONWEALTH FACED SEVERE BUDGET

DIFFICULTIES.

DESPITE VERY STRONG RESTRAINT ON ITS EXPENDITURES IT

STILL WAS FACED WITH A DEFICIT ESTIMATED IN THE BUDGET AT

SOME $2608 MILLION.

IN CONTRAST, THE STATES THIS YEAR HAD ALL EITHER BUDGETED

FOR A BALANCE OR A VERY SMALL DEFICIT.

THIS WAS DESPITE THE FACT THAT IN THEIR LATEST BUDGETS

ALL THE STATES HAD OFFERED TAX CONCESSIONS,

THE TREASURER SAID IT WAS CLEAR THAT THE COMPLAINTS BY SOME

PREMIERS ABOUT HARSH FINANCIAL TREATMENT WERE EMPTY RHETORIC.

COMPLAINTS ABOUT THE INCOME TAX SHARING ARRANGEMENTS FROM

THE SAME PREMIERS THEREFORE HAD TO BE TREATED WITH SCEPTICISM

THE FACT WAS THAT IT WAS ESTIMATED THAT THE STATES-AS A- WHOLE

THIS YEAR WOULD HAVE SOME $90 MILLION MORE GENERAL REVENUE

UNDER THE INCOME TAX SHARING ARRANGEMENTS THAN THEY WOULD

HAVE HAD UNDER THE PREVIOUS FINANCIAL ASSISTANCE GRANTS

ARRANGEMENTS. .

THE TREASURER POINTED OUT THAT THROUGHOUT THE LONG AND

BITTER EXPERIENCE OF UNIFORM TAXATION IN POST-WAR YEARS

ALL PREMIERS IRRESPECTIVE OF POLITICAL PARTY HAVE BEEN

ADAMANT THAT THE UNIFORM TAXATION SYSTEM WAS BAD AND THAT

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IT WOULD ULTIMATELY, IN CONJUNCTION WITH THE GROWING USE

OF SECTION 96 GRANTS, DESTROY THE STATES AS TRULY SOVEREIGN

PARLIAMENTARY BODIES.

THE GREAT COMPLAINTS OF THE STATES HAD BEEN IN TWO DIRECTIONS,

FIRST THAT THE REVENUE REIMBURSEMENT IN UNTIED FORMS AVAILABLE

TO THE STATES HAD GROWN MORE SLOWLY THAT THE REVENUES AVAILABLE

TO THE COMMONWEALTH, AND SECONDLY THAT THE SPECIFIC PURPOSE

GRANTS WERE PRE-EMPTING AND SWAMPING STATE DECISION-MAKING

PROCESSES.

ALL STATES HAD URGED THAT THEIR RECURRENT REVENUE SHOULD BE

ALLOWED TO GROW AT THE SAME RATE AS THAT OF THE COMMONWEALTH

AND VARIOUS APPROACHES WERE MADE TO ACHIEVE A REVENUE SHARING

ARRANGEMENT BASED UPON A FIXED PERCENTAGE SHARE OF PERSONAL

INCOME TAX.

THIS PROPOSAL WAS PUT FORWARD BY ALL PREMIERS IN 1970 AND

WAS RE-ECHOED BY VARIOUS PREMIERS IN THE ENSUING YEARS,

INCLUDING THE SOUTH AUSTRALIAN PREMIER IN 1974.

THE DECISION CF THE COMMONWEALTH TO UNDERTAKE STAGE I

OF REVENUE SHARING BY GIVING THE STATES A FIXED PERCENTAGE

OF PERSONAL INCOME TAX WAS WHOLLY IN LINE WITH THE FORMER

ARGUMENTS AND REQUESTS OF THE VARIOUS STATES.

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MR LYNCH CONCLUDED THAT DESPITE THE RHETORIC AND

MISINFORMATION FLOWING FROM SOME PREMIERS, THE

COMMONWEALTH WOULD ENTER THE FORTHCOMING DISCUSSIONS

ON TAX SHARING IN A POSITIVE AND CO-OPERATIVE MANNER:

IT WAS COMMITTED TO THE PHILOSOPHY OF FEDERALISM.

CANBERRA ACT 5 Apr 1977