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Tuesday, 26 August 1969

Senator COTTON (New South Wales) - At the close of the second instalment of this fascinating Budget serial I was dealing with three basic issues which I said I believed were critical for the Australian people and their Government at this time. They are, firstly, defence and survival; secondly, economic management; and thirdly, social justice. I was putting the proposition to the Senate that the adequate handling of the first two elements made it possible to do something useful and effective in the area of social justice. I had said in regard to defence and security that I believed we had taken a positive line and policy through the years in which we had been involved in government, that we had maintained our alliances, had added to our defence capacity, and had taken part in the fight against aggression where and when we were able to do so. May I say in passing, because the opportunity may not occur again, that I very much approve the recent statement on foreign policy. To me it seems to be realistic. It is up to date and is in accord with our size, our ability and our responsibility.

People have been criticising defence spending and defence expenditure proposals, so I think" it is fair to make some comments on defence. Defence programme spending cannot really be a matter of isolation from one year to another. If honourable senators look at the figures tabled earlier with the Budget they will find that in the years 1967-68 and 1968-69, and in this year 1969-70, the expenditure is practically identical. The rate is about $1,100,000 and it has been fairly constant throughout that period. As a comparison, the expenditure rate of the last 3 years is about double that of 1963-64.

As a further illustration honourable senators will find in the Budget papers a reference to the components of public authority expenditure. This appears at page 22 of the document entitled 'National Accounting Estimates of Public Authority Receipts and Expenditure'. This subdivides Commonwealth expenditure into the main areas and shows the rate of increase. Looking at the figures honourable senators will find that in the 1960s, the decade referred to earlier, the average annual increase in expenditure on war and defence was 14.4%. The next item was education, with an average increase of 11.5%. Roads expenditure increased by 8.8%; health and welfare by 8.8%; and power, fuel and light by 8.1%. So the Commonwealth has practically doubled defence expenditure over about 6 years. It has maintained a constant rate of increase, the rate being the highest in the expenditure sector. Regard has to be paid, of course, to conflicting demands for other things as well as to conflicting problems.

This year's proposal is not very different to that of the previous 2 years. It is the beginning of a stage in a defence spending programme embarked upon some time earlier. The time to be really concerned about defence spending would be when the next programme is announced. We have equipped ourselves fairly substantially and there will be automatic increases in the equipment and expenditure programme. Therefore I believe that defence expenditure at present is in accord with the programme already approved, is consistent with our responsibilities, and is consistent with our ability to pay. The other area of economic management has been dealt with fairly extensively both by myself and by others on previous occasions, but I think it can be said that the country has had competent economic management. This is shown by the strength of its currency through two devaluations, by the strength of the capital inflow, by the demand that people have for taking up Australian loans, both externally and internally, and by the ability of the Government to finance its redemptions and its borrowings at fairly favourable rates. If we did not have good economic management we would not have these two things: We could not survive devaluations and we would not have the strength in our currency or the attraction for investors that we do have. As I have tried to demonstrate, there has been a good line of economic policy kept through the Budget.

The present situation has changed to that applying when the previous Budgets were presented. Roughly it is a balanced Budget - there is perhaps a slight surplus or a slight deficit, but not very much - as distinct from a previous pattern of fairly heavy deficits. I think that is fairly good management at this point of time, moving into the next decade. I believe we have had a situation of stability and of sound growth within what we had available to us to do things. For those honourable senators who think that this subject is of interest, I commend the concluding paragraph of page 5 of the Reserve Bank's report which, I think, would roughly bear out what I say. Equally it stresses the need to maintain a fairly careful hand on the economy from now on. It stresses the fact that the economy is fairly fully employed. I think no-one would quarrel with that. The aim of the Government at this time surely must be to maintain confidence in its currency, in its strength and in its capital position and at the same time to sustain a sensible and realistic growth programme. That is what is being done.

In the third area of social justice, we must all remember that it is the efforts of the Australian people in increasing real wealth that makes it possible for any government to distribute this to them in various ways and to overcome pockets of distress or pockets of deficiency. I think the Treasurer (Mr McMahon) put it well when, in his Budget speech, he said:

Although economic feasibility will, in the end, set limits to what can be done in any field, economic purposes will have little meaning unless they contribute to personal and humane values. It is the physical and intellectual progress of the community and of the individual human beings in it that ultimately counts.

To me, that is a real statement of fact. I believe completely in that kind of operation and in that kind of attitude. People have a legitimate right to be critical of the amount of money dispersed in various activities of social welfare. Anybody can say that he believes that the Government should have done more in one area or more in another area or perhaps that it could have done less in one area and more somewhere else, but social welfare payments come out of real wealth and can come only from real wealth. Increased payments can come only from increased real wealth. The strength of the country as a whole, as an economic unit, ls what permits social welfare payments to be made. If honourable senators refer again to the Budget papers they will see that since 1963-64 there has been an increase in national welfare payments from $832m to a figure of $1,337,430,000, which is not quite twice but is getting in the area of twice as much being distributed in social welfare now than last year. Although we might argue about the various areas in which it is distributed, the economy as such is distributing a great deal more money than it did before and is distributing real wealth. The Government has set out to try to alleviate the deficient areas in the distribution and to give something to those people who did not have it before.

It was in this sense that I believe that it was right, proper and just to do something for the independent schools. This approach in the Budget was consistent with my own philosophy. I think, looking at the overall position of welfare in the community, one could say legitimately that this was an area of underprivilege at a given point of time - now - and I was pleased to see the Government take steps to alleviate the position. The economy at the moment does have one or two elements which can be commented on as perhaps problems that are coming towards us. The one that is mentioned often is the one that I would like to reiterate, and that is the pressure on the labour force in the community. I note that last year we had a very significant achievement in our migration programme, which was the highest on record since the 1950s. Equally it had in ft a high component of people who went straight into the work force. It is very important for us to try to continue our migration programme and to continue, in that programme, bringing out people who can enter the work force immediately. Immigration is a dynamic factor in national growth, particularly when the migrants can turn their hands to gainful employment immediately.

For quite some time productivity of the Australian community has been running below the increase in the wage rate. If one looks at the 1970s dispassionately and free from political prejudice one could well say that one of the things Australia, as a nation, has to do, is to improve its total productivity. Without anybody lecturing anybody, this is a very important thing for a country of this size and responsibility and with these resources to remember. Improvement in productivity in Australia perhaps will be the decisive factor that will count in the 1970 decade if we want to add to the real wealth of Australia. Equally it will be important in a fully employed economy and in a growth economy to keep a constant watch on inflationary pressures. These are of two kinds. One is the demand inflationary pressures which are less important than the other pressures which are the cost inflation pressures which come about particularly in a situation where productivity runs well behind increases in wage rates. These add to increases in costs and in the end do not really help anybody very much.

People have seen fit to say that the Budget is inflationary. As I said earlier, this view is a matter for the individuals concerned. The Budget does comment that the net expenditure on goods and services in Australia this year has fallen from 10.4% last year to 7.3%. The figures are listed in a table in the Budget papers and show effectively enough that the Commonwealth has set out to decrease, as far as it can, its own expenditure. The net effect of this is not inflationary but tends to place the economy in a more balanced position. That, honourable senators, is my present view of the Budget situation. I have tried to analyse it fairly and dispassionately. I believe it is a good instrument. I believe it is a proper instrument at this point of time in the economy. I do not see that I am in any situation to support the amendments. To me, they do not have any real economic merit.

Senator Gair - Can the honourable senator justify the reduction in the defence vote?

Senator COTTON - 1 do not regard it as a reduction. If the honourable senator cares to examine the figures in the Budget speech, I think he will find himself forced to agree.

Senator Gair - When one has regard to the increase in salaries and the other things that will take place, the actual expenditure on defence will be considerably less.

Senator COTTON - Perhaps I could repeat an earlier part of my speech and refer the honourable senator to the Budget Papers which give the defence expenditure over the last 3 years. I could not support the amendment moved on behalf of the Australian Labor Party or the amendment moved on behalf of the Democratic Labor Party. I believe the Budget is a good, a sensible and a liberal one and fully in accord with the spirit of Liberal philosophy.

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