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PRIME MINISTER

FOR PRESS 25 JUNE 1978

ELECTORATE TALK

What the Federal Government put before Premiers this week  is the result of deliberate judgement of the Government as  to what is necessary for continuous and sustained economic  recovery in Australia.

Inflation was 8.2 percent for the twelve months to March. It is now on a downward trend. It will stay on that trend.  Management of the Australian economy still requires the  most rigorous expenditure control by the states as well

as the Commonwealth. This control is a prerequisite to  a responsible economic management —  and essential if we are  to return to full economic health.

The states know we will continue to maintain the utmost  restraint on all components of our spending this coming  financial year. Every state has the potential and capacity  to make a contribution to recovery in Australia by following

this lead.

States can help us lower inflation and inflationary .

expectations by contributing to cutting the size of Government  and the Budget deficit.

It is time to re-emphasise the strong gains we have made in the economy and not to risk going back to the mad "helter-skelter" years of Labor.

My Government is going to make certain that expenditure is  controlled and the creeping growth in Government is halted. We are going to do this so that private industry again has  room to move forward and so that interest rates will

keep coming down.

I was surprised that the Premiers failed to focus in any way  on the importance of low interest rates to Australia's economic  recovery. A continuing reduction in interest rates would be the  best possible news for every small business in Australia, for

every farmer, for every homeowner.

We have a clear policy of creating conditions where interest  rates will fall. We will not take advice or pursue policies  which reverse that trend. That downward trend has started  because of our policies and it will continue.

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If we had taken the advice to spend money given to us over  the last two and a half years by the Premiers I have not  the slightest doubt that inflation in this country would  be raging again as it did in the Whitlam years.

It is not only Australia's experience which draws us to that  conclusion. It is the experience of country after country  which has been seduced into an easy path and which has  thought it can get out of its problems by re-inflating at

the wrong time. That kind of approach is no way to economic  recovery, to re-investment and to creating new jobs that  will last. That kind of approach would be disastrous.

Premiers have often called for cuts in taxation and cuts in  interest rates. These goals are both incompatible with their  calls for increased government expenditure. It is our  policies of restraint and reduced government spending that have

allowed us to cut taxes and have interest rates and  mortgage rates fall.

The Australian people have twice rejected the notion that  Governments can go on spending a larger proportion of gross  national product year after year.

Australians know the damage that excessive government  expenditure causes to small business, to farms, to investment. It is easy for governments to have big spending programmes. It is easy to introduce new programmes, but that does not  necessarily mean they will advance Australia's cause.

Spending taxpayer's money to put people on the Government  payroll cannot, and will not, solve unemployment. It will,  however, affect the confidence that investors have in  Australia's economic management and it can lead to more

overall unemployment as a result..

Experience here and overseas has shown the utter folly of  undisciplined expenditure and the unrealistic expectations  that creates. As we know from the past, this inevitably  means printing money which leads to high inflation and high

interest rates. It is the kind of policy that hits families  in all circumstances and in all walks of life. Printing  money is a short way to disaster. It is not a path my

Government will entertain.

What will get Australia moving again is a revival in private  industry, a revival in investment, and confidence in this  country from within and from overseas. To maintain this  confidence we are now re-establishing, we have to be certain  that inflation keeps coming down.  To do this, expenditure  must remain under tight control.

In the months ahead, the healing process now underway in the  economy will be confirmed and strengthened. We are determined  not to throw away what we have already gained through a  relaxing in our economic management policies.

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We have some rare opportunities in Australia because we have  great natural resources.  The world will want access to those  resources.  They will therefore be interested in investing  in Australia, in partnership with Australians.

By making ourselves more attractive, by running a sterner  economy, by making sure inflation comes down and therefore  that interest rates come down, we will attract that investment  and be able to better withstand the difficulties faced by

the trading world and at the same time take advantage of  whatever opportunities may be open to us.

My Government will not be side-tracked from firm economic  management. We will not be pushed off course. Our strong  stand was right for Australia. We certainly make no  apology for it.

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