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1975 CABINET RECORDS – SELECTED DOCUMENTS 11 The economy Grim economic prospects 12 Submission 1534, ‘The Economic Situation’ 13 Submission 1778, ‘The Economic Context’ 17 1975–76 Budget strategy 22 Submission 1564, ‘1974–75 Budget Review’ 23 Submission 1698, ‘Budget 1975–76: Options and Priorities’ 28 Notes on Submission 1698 48 Submission 1928, ‘1975–76 Budget Strategy: Overall Policy Options’ 53 Notes on Submission 1928 68 Decision 3704 on Submission 1928 70 Tightening the belt 71 Submission 1739, ‘Budget 1975–76: Options to Reduce On-going Expenditures’ 72 Decision 3641 (ERC) on Submission 1739 80 Letter from Tom Uren to the Prime Minister 82 Submission 1902, Letter from Jim Cairns to the Prime Minister 85 Submission 1936, ‘Administrative expenses 1975/1976: Possible measures of restraint’ 87 Submission 1937, ‘1975–76 Budget: Further Reductions in Expenditure’ 88 Decision 3710 (Ad Hoc) on Submission 1937 97 Industrial relations 98 Submission 1571, ‘Suggested programme of action for the Australian Government on industrial relations in 1975’ 99 Submission 1960, ‘Policy on wage fixation methods and wage indexation’ 110 Decision 3695 on Submission 1960 117

1975 Cabinet Records - The Economy CABINET RECORDS Ð SELECTED DOCUMENTS 11 The economy Grim economic prospects 12 ... ÔPolicy on wage fixation methods and wage indexationÕ 110

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1975 CABINET RECORDS – SELECTED DOCUMENTS 11

The economy

Grim economic prospects 12

Submission 1534, ‘The Economic Situation’ 13

Submission 1778, ‘The Economic Context’ 17

1975–76 Budget strategy 22

Submission 1564, ‘1974–75 Budget Review’ 23

Submission 1698, ‘Budget 1975–76: Options and Priorities’ 28

Notes on Submission 1698 48

Submission 1928, ‘1975–76 Budget Strategy: Overall Policy Options’ 53

Notes on Submission 1928 68

Decision 3704 on Submission 1928 70

Tightening the belt 71

Submission 1739, ‘Budget 1975–76: Options to Reduce On-going Expenditures’ 72

Decision 3641 (ERC) on Submission 1739 80

Letter from Tom Uren to the Prime Minister 82

Submission 1902, Letter from Jim Cairns to the Prime Minister 85

Submission 1936, ‘Administrative expenses 1975/1976: Possible measures of restraint’ 87

Submission 1937, ‘1975–76 Budget: Further Reductions in Expenditure’ 88

Decision 3710 (Ad Hoc) on Submission 1937 97

Industrial relations 98

Submission 1571, ‘Suggested programme of action for the Australian Government on industrial relations in 1975’ 99

Submission 1960, ‘Policy on wage fixation methods and wage indexation’ 110

Decision 3695 on Submission 1960 117

12 1975 CABINET RECORDS – SELECTED DOCUMENTS

Grim economic prospects

Historian Geoffrey Bolton has observed that the 1974 election would have been a good one to lose, with a world economic crisis, rising unemployment, spiralling inflation and falling profits. The Whitlam Government had struggled with economic policy in the second half of 1974, falling out with Treasury over budget strategy and replacing Frank Crean with Jim Cairns as Treasurer.

These documents show the Government’s reading of the economic situation in 1975. In January, Cairns warned that it was ‘very bad’ and that there were ‘no quick solutions’. Unemployment was high and looking to remain so; inflation was rising and business confidence shaky. He noted community concern with inflation, a concern ‘not allayed by increased Government spending’ [A5915, 1534].

During Cairns’ tenure as Treasurer, the Government abolished capital gains tax, granted additional funding to the states (to avoid further job cuts) and reduced vehicle taxes to assist the car industry. However, Cairns did not provide the stability needed in the economic climate of 1975: Gough Whitlam later commented that Cairns had a poor relationship with Treasury, that he did not always support his own submissions in Cabinet meetings and that he was re-assessing his own personal, economic and political values. The Prime Minister turned to Bill Hayden to restore credibility to the Government’s management of the economy.

In June, Hayden saw enough signs of improvement in the economy to comment that ‘We can now be reasonably confident that we have halted the downslide in economic activity’. But he warned that longer-term economic stability required an increase in business investment. Inflation was the core problem, and Hayden identified one of its causes as the Government’s attempt to ‘push ahead a little too quickly’ with its social and economic policies [A5915, 1778].

1975 CABINET RECORDS – SELECTED DOCUMENTS 13

Submission 1534, ‘The Economic Situation’ [A5931, CL155, pp. 262–259]

14 1975 CABINET RECORDS – SELECTED DOCUMENTS

Submission 1534 cont’d

1975 CABINET RECORDS – SELECTED DOCUMENTS 15

Submission 1534 cont’d

16 1975 CABINET RECORDS – SELECTED DOCUMENTS

Submission 1534 cont’d

1975 CABINET RECORDS – SELECTED DOCUMENTS 17

Submission 1778, ‘The Economic Context’ [A5915, 1778]

18 1975 CABINET RECORDS – SELECTED DOCUMENTS

Submission 1778 cont’d

1975 CABINET RECORDS – SELECTED DOCUMENTS 19

Submission 1778 cont’d

20 1975 CABINET RECORDS – SELECTED DOCUMENTS

Submission 1778 cont’d

1975 CABINET RECORDS – SELECTED DOCUMENTS 21

Submission 1778 cont’d