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Tuesday, 23 April 1985
Page: 1351

Senator PETER RAE —My question is directed to the Minister for Finance. I ask whether the Minister agrees with the Prime Minister, who said yesterday that Australia 'cannot simply go on running up debts and living beyond its means'. I ask further whether the Minister agrees that this situation would be aggravated if claims at the next national wage case are not discounted for the effects of devaluation. In the light of Mr Hawke's call for the belt tightening, will the Minister now indicate firm Government support for that option?

Senator WALSH —Unintentionally, no doubt, this question is related to the question just asked by Senator Reynolds. We might get various definitions of when a country is living beyond its means, but one definition which I think would find widespread agreement is that when economic growth is taking place at a sufficient rate for unemployment to be coming down, and assuming that the pre-existing Budget deficit was an inappropriate deficit, then the deficit as a proportion of gross domestic product ought to be reduced. If that does not happen, the structural deficit is increasing. Any government which persistently runs a structural deficit is clearly a government which is living beyond its means. Such a government is the Government of Queensland. It is doing so to an extremely irresponsible degree.

As to the other question, the claims which may be made at the next national wage case, which is due, I think, in September, consequential to devaluation are not likely to be large. Even if the full consumer price index effect of the devaluation is claimed, it is not likely to be large because that will incorporate the two quarters ending March and June of this year, and in those two quarters the devaluation effect on the CPI is expected to be quite small. If the exchange rate stays at around its present level, at a later time it will be more significant.

The Government's attitude to this, which has been stated by the Prime Minister on certainly one occasion and probably on more occasions, and which has been repeated by me here, is that there is no urgency to develop a government response to that at this stage, given that the hearing is not likely to take place until September. As far as I know, that remains the Prime Minister's view, and it remains my view.