THE PRESS SATURDAY, MAY 26, 1979. Australian mini-Budget

Press, 26 May 1979, Page 14

THE PRESS SATURDAY, MAY 26, 1979. Australian mini-Budget

Australians appear to be at least as unhappy about being subjected to a bleak mini-Budget this week as New Zealanders were last week. Cuts in welfare and education spending across the Tasman have been accompanied by the retention of an income tax surcharge and a postponement of tax indexation. The last two measures meant that the Government broke promises, and Australian newspapers show no signs of letting the Government forget that promises were made. The Federal Treasurer, Mr John Howard, and the Prime Minister, Mr Malcolm Fraser, have said that the mini-Budget is justified because it demonstrates a sense of economic responsibility. The Governments of both Australia and New Zealand also showed a sense of political awareness in not leaving too many nasty measures for the Budgets that both will bring down in the next few weeks. The economic responsibility that Mr Howard and Mr Fraser consider foremost lies in keeping down inflation and restricting the size of the internal Government deficit — the difference between what the Government gathers in tax revenue and what it spends. In Australia the internal deficit may be about S 3 billion: the figure for the internal deficit given by the New Zealand Prime Minister. Mr Muldoon, the other day was 51446 million. Australia's economy is about five times the size of New Zealand’s and the New Zealand deficit is just under half Australia’s. In

Australia the inflation rate for the 12 months to March this year was 8.2 per cent; in New Zealand during the same period the rate was 10.4 per cent.

Neither Mr Fraser nor Mr Howard saw much change likely in the inflation rate over the next 12 months. The saddest aspect is that little change seems likely over the number of unemployed in Australia. However, by tolerating a higher rate of unemployment, Australia is managing better on the inflation front. The decision to reduce the amount of rebate payable on medical bills is likely to have a devastating effect among some sections of the Australian community. A recent survey found that 60 per cent of the unemployed had no private medical insurance. In Australia there are limits on the cover given by the Government, so it is important to have private cover. The proportion of those not covered for medical expenses in the whole population is high.

The implications for New Zealand in the Australian moves lie in the fact that while unemployment remains high, little movement is likely on trade access. Australians may not have had their disposable income reduced by a great amount but, over all little expansion will be discernible. The measures have not been so Draconian that they are likely to give much pause to those New Zealanders who believe that they will find a better life across the Tasman; nor will they drive out Australians who believe that New Zealand could be no worse.