Embargoed until 7.00 p.m.

PRIM E MINISTER

FOR PRESS 31 JULY 1977

ELECTORATE TALK

This week, Australians heard more good news about progress in  our fight against inflation. The June quarter Consumer Price  Index increase of 2.4% was the lowest June quarter increase  for five years. The figure put Australia's inflation rate  over the last financial year - as measured by the CPI - at 10.2%.  This figure, of course, excludes the Medibank levy cost as health

insurance has always been a family cost.

Our achievement in the inflation fight is considerable. It is  certainly a far cry from the 16% and 17% levels of only 18  months ago.'  .

I want to make one point clear. Inflation is not coming down  because of magic wands of luck.  It is coming down because of  sound and well-based economic policies and responsible economic  management. The gains were won because of our absolute determinaÂ­

tion to win - despite strong and persistent pressure to return to  the disastrous ploy of more Government spending to aid one group  or another.

The Federal Government will not take our gains so far for granted  We will not rest on laurels.  Our determination to reduce  Australia's inflation rate below that of our overseas trading  partners is as strong as ever. We will continue with policies

that will keep grinding down inflation.

It is worth making the particular point that our success so far  in this fight has been due in large part to our last budget. It is absolutely clear that my Government's first budget was  the right budget. The strategy was right. Government expendiÂ­ tures were largely held within budget estimates for the first  time in some years. The deficit was substantially reduced. The

growth in the money supply was held on target. Investment  increased and most importantly, the economy began to grow again.  It is too easy to forget that only two years ago the Australian  economy actually shrank. z

In just over a couple of weeks, the Treasurer will present the  Government's second budget. The Government is aware that it  comes in a critical point of our planned economic recovery. We are aware of the responsibility we carry.

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In the last week, Cabinet has completed what I believe  has probably been the most exhaustive examination of  Government expenditure ever undertaken in framing a  Federal budget in Australia. We have put the microscope

over every area of Government expenditure. We have left  no dollar of taxpayers funds unturned. I am pleased with  the results. I believe the Cabinet is on the way to framing  a realistic budget that will keep Australia continuing on

the path to full economic recovery. It will keep our antiÂ­ inflation attack on course.

Let no one be under any misapprehension that we are fighting  inflation simply to boast about trends and figures. We are  fighting a real disease - a disease that destroys the very  fabric of family life and builds divisions in the community  that take years to heal. Inflation is not about facts and  figures - it is about families.

While the Government can do a great deal in this fight, there  is one area where our influence is indirect - wages. It is  clear that our inflation fight is being hampered by overÂ­ priced labour costs.

One set of figures graphically illustrates the point. Based  on ruling exchange rates at the time, average weekly earnings  in Australia in 1971 were 17% lower than in the United States.  Now, they are 13% higher Â·  in Australia than in the United  States.

A recent survey has shown that two-thirds of companies  wholly or partially absorbed the last two wage rises without  increasing prices, but that half of these companies did so  by reducing their number of employees. One man's wage

increase is - without doubt - another man's job.

