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Tuesday, 16 February 1971

Senator Sir KENNETH ANDERSON (New South Wales) (Minister for Supply) - by leave - Earlier this evening I indicated that the Prime Minister (Mr Gorton) would be making a statement in the other place. I now have a copy of the statement made by the Prime Minister, lt is very brief. When I use the first person personal pronoun it refers to the Prime Minister.

I recently spoke to the nation on the state of the economy and on the likely inflationary effects of the Commonwealth Conciliation and Arbitration Commission's award of a 6 per cent increase in wages and salaries. I said then that in order to decide what action should be taken now, Cabinet had sought to discover the areas in which demand seemed to be growing most strongly. One of those areas is the public sector - spending by governments - and we believe one of the first lines of attack on rising costs and prices should be to restrict what is being spent in that area.

When our Budget was introduced last August it was estimated that total Commonwealth expenditure would be $7. 883m. I should say here, I think, that although called Commonwealth expenditure, this amount included $2, 708m for reimbursement grants and other payments to the States. Indeed, such payments made up more than one-third of the Commonwealth Budget. The total increase was 11.2 per cent more than the year before. But since that Budget was formulated the Government has been faced with significant additional expenditure. The national wage case decision and other wage determinations are estimated to add directly, in the rest of this financial year, S88m to the Commonwealth's own wage and salary bill in 1970- 71. In addition, those wage determinations, because they nave led to an increase in average wages greater than what was expected, will require the Commonwealth to pay an additional $20m to the States under the formula between the Commonwealth and the States. In addition, we will need to pay some $58m to the States in this financial year to recompense them for the loss of the receipts duty tax on which they had budgeted. Mainly as a result of these outlays, payments to the States are now expected to exceed the Budget estimates by some $83m, and emergency payments associated with recent Moods will doubtless increase the outlays required.

Other additional demands on our resources since the Budget was brought down include the provision of $12m as a capital advance to the Australian Wool Commission, and we believe some $6m will be required this financial year for rural debt reconstruction and farm adjustment.

Senator Keeffe - Mr Acting Deputy President, the Leader of the Government is reading a statement that was made by the Prime Minister in another place-

Senator Sir KENNETH ANDERSON - For which I have been given leave.

Senator Keeffe - Normally copies are distributed.

The ACTING DEPUTY PRESIDENT (Senator Laucke - Order! Leave has been granted.

Senator Keeffe - -Could not copies of the statement be distributed? Why cannot we read it?


I do not have any copies.

Senator Keeffe - lt is the first time this has happened in the history of this chamber.

Senator Sir KENNETHANDERSONAs soon as I get them I will make them available. I cannot do any better than that. We must also expect increases in costs of the material used by the Government. So all in all, it is estimated by the Treasury that the net increase in expenditure since the Budget was prepared will amount to approximately $242m, if departments were provided with the sums they have asked for. This is the background against which we have decided that we should make reductions in what would otherwise have been spent.

Having made a complete and detailed survey of Commonwealth expenditures, we propose to reduce the amounts which departments have sought by some $75m in the remaining months of this financial year. These reductions are' made across the whole range of Commonwealth departments, but they do not involve any reductions in our payments to the States. Our object has been to effect reductions in the Commonwealth expenditures for its own purposes. We have not sought to achieve this at the expense of the States. A dissection of the reduction of $75m as between the main categories of Commonwealth expenditure is provided in a table which, with the concurrence of honourable members, I incorporate in Hansard.


Further details of the various reductions will be provided as necessary by individual Ministers. Thew reductions are spread right across the board, but it will be observed thai the areas where the more substantial savings have been made are defence, capital works and capital advances. and departmental running expenses. We were particularly anxious to effect economies in administrative expenditure, including the overtime and salary expenditures of Commonwealth departments. At the same time we have endeavoured to avoid reducing expenditures on essential development activities. In more general terms, we have sought to reduce the contribution of Commonwealth expenditures to total demand and to curb the Commonwealth's demands on the labour market.

Thus the reductions in departmental expenditures will involve restraint on Public Service employment. The Public Service Board reported to me that a routine statistical projection made prior to my instructions indicated an increase in 1970-71, in full-time employment under the Public Service Act, of 4.6 per cent on the numbers employed as at 30th June 1970.In 1969- 70 the comparable increase was 4.8 per cent, whilst the increase in total civilian and defence forces employment in the community was 4 per cent. The Board advised me that my instructions for restraint on establishment increases could benefit the health and soundness of administration in the Commonwealth Service, and it suggested that a limitation should be placed on the increase in Service employment.

The Public Service Board has now reported to me that in its discussions with departments, it has stressed the Government's policy of restraint but has not endeavoured to impose arbitrary cuts in employment. The Board's recommendation, which has been accepted, was that departmental increases in employment, which will be kept to the minimum, should not exceed at 30th June 1971 an overall increase in the Service of 3.4 per cent as compared with numbers employed under the Public Service Act on 30th June 1970. This is a reduction of about 25 per cent on the projected increase in employment disclosed in the Board's earlier survey. Put another way, the Board's original projection was that the Service would grow by 10.534 in 1970-71. This growth has been cut by 2,735.

The Commonwealth has, I believe, moved quickly and firmly in the area available to it. It is necessary to do so. For, as we see it, the best interests of the community require that inflation shall be overcome, and one of the first steps to this end must be action to restrain our own expenditures.

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