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Thursday, 2 December 1971
Page: 4029

Mr BARNARD (Bass) - These 3 pieces of legislation are part of the complex fabric of Commonwealth assistance to the States. I want to concentrate my remarks on the States Grants (Special Assistance) Bill. This is designed >o authorise payment in the present financial year of S7m to South Australia and S7.8m to Tasmania, in recent years there has been quite a remarkable about-turn in the application of this special assistance. When the 1968 Bill was put to the House, emphasis was put on the end of Western Australia's dependence on the Commonwealth Grants Commission. It. seemed then that Tasmania would be the only remaining claimant State for special assistance.

On all the indications available it seemed that the Grants Commission was coming to the end of its period of useful life. With Tasmania the only claimant State, it hardly seemed necessary to retain the Grants Commission. Since 'hen South Australia has elected to return to the protection of the Grants Commission as a claimant Stale. This is reflected in the legislation before the House which provides special assistance to South Australia which had relinquished its claimant State status in 1959-60. Now Queensland has approached the Grants Commission for special assistance, although the approach was too late for implementation in this legislation. It seems that there is still a role for the Grants Commission, that despite pride in sovereignty and States rights there are still advantages in retaining the despised mendicant status.

In its 37th report published in 1970, the Grants Commission dealt in considerable detail with public finance and fiscal policy in Tasmania. In its latest report, the Commission treats the problems of CommonwealthState relations in a rather broader perspective. It is disappointing that some of the specific issues affecting budgetary pOliCy in Tasmania raised in the previous report have not been followed through in the latest report. Perhaps this was inevitable with the return of two of the claimant States to the fold. The Commission recommended payment of a special grant to Tasmania for 1972 of $7. 8m. This was composed of an advance grant of Slim based on the estimate of a deficit of $15,878,000 in 1971-72. However, this grant of Slim is subject to subtraction of the complete grant for the previous year.

Adjustment to the State budget based on the standard derived from New South Wales and Victoria have produced a negative completion grant of S3. 2m. This completion grant was considerably augmented by the special payment of SI. 5m in 1969- 70 by the Commonwealth to Tasmania to help that State finance its expected revenue debt. Undoubtedly Tasmania has been treated according to the strict letter of practice and precedent. The calculation of the special assistance is impeccable; it is in accordance with carefully prescribed and observed procedures. What is open to grave doubt is the wisdom of this .scrupulous observance in a period of very grave financial peril for Tasmania. For this reason it is disappointing that the special assistance the Commonwealth thought warranted by the State Budget projections should be chopped by 30 per cent by the completion grant formula. This prompts the feeling that the whole machinery is too inflexible, that the objectives of fiscal adjustment would be better served by adopting a broader framework and a less rigid time scale.

In this debate last year I referred to these questions, and the case I put forward then has been substantiated by the results contained in the latest report of the Grants Commission and implemented in this Bill. Whatever the merits of the present structure, it is not providing long term financial planning for the State. Economic growth in the State has proceeded in an extremely erratic pattern. Part of the reason for these fluctuations in growth is the susceptibility of the Tasmanian economy to natural disasters such as flood and fire. But it must be realised that a major cause is uncertainty and timidity in budgetary policy. The State Government is left in considerable uncertainty about future planning because it is dependent on the calculations of the Grants Commission. The Budget always has a concealed element in the incidence of the completion grants formula. Depending on the modified budget results in New South Wales and Victoria, the Tasmanian Government may get an unexpected windfall or it may have potential revenue drastically cut back. This machinery brings short term benefits to Tasmania in effective accounting and scrutiny of the day to day operations of the economy. It has the disadvantage of hindering long term economic planning in the State. The impact of the Commonwealth through the overwhelming influence of the Grants Commission on the State Budget has limited the opportunities for enlightened fiscal policy.

Undoubtedly the Tasmanian Budget is the most closely constrained in Australia. There are strong grounds for relaxing this structure and adopting more flexible techniques of fiscal planning for the State under the guidance of the Grants Commission. Again in this debate last year, 1 recommended that the Grants Commission should be asked to develop a system of programme budgeting which would allow spending to be analysed and incorporated into an overall budgetary framework projected up to 5 years ahead. Unless revenue and expenditure flow can be projected in the framework of programme budgeting, there is little possibility of achieving effective planning for Tasmania. Certainly no State in the Commonwealth needs long term planning more. It is difficult to look at the future of Tasmania with any degree of optimism. The State has been hit particularly hard by the present recession in economic activity deliberately induced by Commonwealth Government policy. This shows up in the employment figures. The pleasant surprise promised by the Prime Minister (Mr McMahon) for the October figures certainly did not show up in the State breakdown for Tasmania. Before the attack on demand initiated by the Treasurer (Mr Snedden) in this year's Federal Budget, pockets of severe economic stagnation already existed in Tasmania. The policies of the Commonwealth Government have produced further unemployment and hardship. This was an inevitable result of policies aimed to suppress demand across the board rather than concentrating correc tive action on the sectors of the economy where powerful inflationary forces existed. Inflationary forces have not run unbridled in Tasmania, yet Commonwealth policy has dealt the State a particularly savage blow. According to Commonwealth Employment Service statistics for Tasmania, the proportion of unemployed in October was 1.71 per cent, the highest in Australia. So much for pleasant surprises.

In the debate on the no confidence motion yesterday the Government spokesmen did not refer to a widely publicised scheme to make S20m available to the States for emergency grants to country councils in areas with serious unemployment. Now the Prime Minister has waited until the last possible moment before disclosing the scheme to the House. The only reason for keeping back such a project seems to have been that the Government did not want to give the impression of being goaded to act by Opposition pressures. This is illogical because a scheme of this nature is primarily a welfare measure. It should be regarded not as an overall stimulus to the economy but as a relief measure linked to the reconstruction of rural industries which is ostensibly part of Government policy. It is a measure which should have been introduced at least 2 budgets ago when the deterioration in rural employment become apparent. The effect of such emergency grants on aggregate demand and the restoration of the national economy will be relatively unimportant. But as a selective measure aimed at reviving economic activity in depressed sectors of the economy, this proposal has merits. If the Government is seriously intending to introduce such a scheme, then I urge that consideration be given to those pockets of economic stagnation and unemployment which show up in the economic indicators for Tasmania. The Government is cutting it pretty fine if it intends to get an emergency grants scheme into operation before the Parliament rises. Even if the first grants were made tomorrow, it would be some months before any real benefit would be felt in the local government areas assisted. It seems that the New South Wales Premier, Mr Askin, announced in the State Parliament this morning that the Commonwealth would make these grants available. Apparently this was done with the authority of the Prime Minister after the inevitable telephone call. At the same time Mr Ask in was announcing the measure as established fact, the Federal Treasurer (Mr Snedden) was stonewalling questions on it in this House. He managed to convey the impression that the Commonwealth did not favour making additional grants to the States. It is extraordinary that the Prime Minister should delegate to a St;,te Premier the announcement of such an important policy matter at a time when the Commonwealth Parliament was in session.

Reverting to the broader picture of the Tasmanian economy, it is obvious that Tasmania"* economic growth depends on the maintenance of comparative advantage of its industries in the internal Australian market and in the export trade. This comparative advantage has been eroded in the past few years. Cost advantages which industry based in Tasmania once enjoyed through cheaper power and other concessions have been whittled away. There has been little movement of new industry from mainland States to Tasmania; a reverse flow has gained ground with a number of prominent industries moving back to the mainland. Heavy increases in shipping freights have accentuated this trend. The deterioration of the internal transport structure, in particular the railways, has assisted the loss of comparative advantage by Tasmania. Coupled with this loss of comparative advantage has been a relatively low rate of public and private investment. This problem of sagging investment was studied by the Hunter River Foundation in its report on Tasmania's economic growth. Unfortunately the last estimate given by the report is for 1967-68. but there is no sign that the trend has changed in the subsequent years. In 1967-68 the Foundation estimated that Tasmania's gross regional product was S659m. Using this as a yardstick, the Foundation estimated that the Stale needed n flow of investment from government and private enterprise amounting to more than Si 80m a year to sustain an adequate regional growth rate, lt is difficult to give even a rough estimate of the present level of investment in Tasmania, but there is no reason to believe it is anywhere near this base figure of SI 80m a year. On the information available in Grants Commission reports, Budget papers and other sources it is unlikely that investment is running anywhere near a level sufficient to maintain ait adequate growth rate.

The Commonwealth must accept some of the responsibility for this apathetic investment rate. An example is the deadlock which seems to have arisen over the provision of Commonwealth assistance fur the upgrading of Tasmanian main line railways. Commonwealth support for litis major project has been recommended "bv a Senate standing committee and the takPoy report. The Minister for Slipping and Transport (Mr Nixon) has indicated that the Commonwealth is willing to consider u request for assistance from the State Government. For some inexplicable reason Mr Bethune and his colleagues have delayed in making the request. I do not blame the Minister for this. Quite clearly he regĀ«'-ds it as his prerogative to wail on the Tasmanian Government's request for as islance. But. there is an absence on either side of the sort of dynamism needed to find the investment funds to lift Tasmania's ailing economy.

I referred earlier in my address to the serious unemployment situation in Tasmania. I regret that, because time is limited in this debate, I will not he able to develop this matter and other related matters to the extent that 1 would like. The plain fact is that, despite the special grunt that has been accorded to Tasmania tis a result of this legislation, there is a deterioration in the economic situation in that State. 1 believe that this has been recognised to a certain extent by the Commonwealth Grants Commission, lt has been recognised that South Australia, too. has special difficulties. That is one of >he reasons why South Australia has elected to apply for assistance through the Commonwealth Grants Commission.

But above all the Commonwealth still has a responsibility to recognise that a Slate has a disadvantage in relation to New South Wales and Victoria in terms of transport, industrial development and all of those matters that help to develop he economy of the smaller States. As a result of the decision of the Commonwealth Giants Commission additional finance will- he provided for Tasmania. But I believe 'hal if the problems of that State and the other smaller Stales are to be arrested the Commonwealth will have to acknowledge that it has a greater responsibility, which should not be left only to the Commonwealth Grants Commission, in relation to matters which are so important if the economy is to be satisfactorily adjusted.

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