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Wednesday, 24 August 1983
Page: 160

Mr HOWARD —In light of the Treasurer's assurance that he has read every line of Budget Statement No. 2, I refer him to page 29 of his Budget Speech where he said:

Unless the structural deficit were to be reduced, strong recovery in the private sector would ultimately bring on a clash for funds between the two sectors, and thus put at risk the durability of recovery.

Does that statement imply that the structural deficit is being reduced in 1983- 84? If so, how does he reconcile that with page 56 of Statement No. 2 which clearly states the Treasury view that there will be a significant increase in the structural deficit in 1983-84?

Mr KEATING —This is a curious question from the high deficit specialist who left us the dubious inheritance of not $9.6 billion but $10.4 billion. If he is so enamoured of Budget statements, he should look at the Budget statements and see the $800m reconciliation for the $10.4 billion. Then the former Treasurer will see how his prognostications about the $6 billion deficit, which he has now adjusted to $7 billion without any indication whatsoever of how to get from point A to point B, lead me to the conclusion that it is very curious that in some way the former Treasurer is now asking about structural deficits and the size of the Budget deficit generally when in fact this Government has done all within its power to reduce the size of that deficit in this Budget.

Let me get to the central point of the question. It is suggested that there could be a clash for funds in the event of the rise in the structural deficit.

Mr Howard —There is a difference.

Mr KEATING —There is no difference whatsoever. We are saying quite clearly that the structural component of the deficit has increased this year, as it needed to do to lift activity in the economy to take it out of the hole in which the former Government left it. But in future years, as we see a pick-up in activity, the whole of the deficit will be affected by that prosperity. It is a lift in the deficit this year at a time of declining private sector investment, as the Deputy Leader of the Opposition well understands. That is why the Government has taken the view that it can finance a deficit of this magnitude in that climate.

In a recovery we will start to see a return of private investment. In the Budget Papers we are forecasting a fall in private sector investment this year, but the position will improve in 1984-85. By that stage the measures we have taken on superannuation, on the assets test and on the income testing of the over-70s-all the structural-type decisions the former Government should have taken responsibly instead of pork barrelling over the years-will have led to a diminution in the structural deficit in the out years and to the strengthening of private sector investment. Business knows that it would have nowhere to go with the people opposite. It knows that well and truly. It understands that, if there were to be a continuing withdrawal of public sector investment this year, we would see an horrendous recession even more serious than the one we have now. Ours is the only strategy for Australia at this time. We have not only the confidence of the majority of the Parliament, the Premiers and those people who attended the National Economic Summit Conference but also, I believe, the support of the broad majority of the Australian people for our strategy.