The Budget
Submission 1245 spelt out what Treasury had outlined in its economic prospects paper [submission 1243]. Having looked at the ministerial bids for 1974–75, Treasury sought to reduce them by $600 million, while raising taxes by $400 million. It was a forlorn hope for three reasons: ministers believed that Treasury had understated the size of the Budget surplus and the effects of monetary policy on unemployment, and – most importantly – they had programs to implement. They rejected arguments that any increase in government expenditure would re-stimulate demand and that any large new expenditure would be at odds with calls upon the community for restraint. So decision 2640 was also noted, ‘without necessarily accepting its conclusions’. While Treasury pressed for reduced appropriations, Cabinet either endorsed the original bids or approved a marginal reduction without much evidence of an overarching Budget strategy. Not that Treasury’s approach was altogether one of slash-and-burn. Ministers, collectively, approved a 32 per cent increase in expenditure on the 1973–74 Budget, and Treasury merely proposed keeping the advance to 27 per cent. Two Treasury officials – Bill (later, Sir William) Cole and John Stone – made one last attempt to dissuade Cabinet with Crean’s submission 1325 on the Budget outcomes (a section of this submission was later published in Michael Sexton’s Illusions of Power, 1979). Against the background of an economy slipping into hyper-inflation, Crean reminded Cabinet of Treasury’s view that anything approaching the projected 32 per cent increase in government expenditure ‘would be economically irresponsible’, hence the proposed cuts and tax increases. Ministers had in fact decided to increase expenditure by a mere $240 million. Crean said he accepted Cabinet’s decision but wanted ministers to have a last opportunity ‘to weigh the outcome’ – a ‘grossly inflationary’ budget which did not deal with rising costs and prices, or with growing unemployment, and which would worsen the balance of payments situation. Crean’s ‘sad conviction’ was that ministers had chosen ‘the worst of all worlds’, and he foresaw ‘a vicious circle of spiralling inflation, rising unemployment and depressed employment and activity – the classic “stagflation” situation’ coupled to a worsening balance of payments problem. It proved to be a prescient assessment. As it was, the Government spent $1.7 billion (or 10.7 per cent) above the 1974–75 Appropriation.
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Submission 1245, ‘Budget parameters’ [A5915, 1245]
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Decision 2640 on submission 1245 [A5915, 1245]
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Submission 1316, ‘The arithmetical implications of the ‘Budget parameters’ submission’ [A5915, 1316]
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Submission 1321, ‘Interim Budget Arithmetic’ [A5915, 1321]
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Submission 1325, ‘Budget Cabinet Outcome’ [A5915, 1325]
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Decision 2609 on submission 1325 [A5915, 1325]
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