The Money Men by Chris Bowen (superbooks4u .txt) 📕

projected deficit, the eventual result of $2.8 billion was a considerable achievement against the projected deficit of $4.8 billion that Hayden inherited. The treasurer did not win all of his battles. His proposal to reintroduce university fees, for instance, was not accepted (Hayden had, in fact, argued against the policy when in opposition, positing that it would not improve access to university for poor people but would subsidise people who would be going to university anyway). But the government did cut back the Tertiary Education Assistance Scheme (TEAS), which had a more regressive impact than abolishing the fees would have had. Hayden also did not achieve the cuts to public housing, Aboriginal welfare programs and infrastructure spending that he wanted.21 But this was somewhat compensated for by rises in the cigarette and beer taxes—the price of a beer went up by 4 cents, and a packet of cigarettes by 6 cents. Edward Nash, the economics editor of The Advertiser in Adelaide, called the scale of these rises ‘breathtaking’. As could be done in the time of government control of the channels of communication, the costs of telephone calls and postage stamps were also increased.

The 1975 Hayden Budget was remarkable in that it not only reduced government expenditure but also introduced considerable measures to improve both fairness and economic efficiency. Hayden commissioned Australian National University (ANU) economics professor Trevor Swan to conduct a short, sharp review of the tax system, working with Treasury assistant secretary Daryl Dixon. Hayden used this review to radically recast the personal income tax system through the Budget, partially implementing the recommendations of the previous Kenneth Asprey review of taxation in the process. The number of personal income tax brackets was reduced from fourteen to seven. Corporate tax was reduced by 2.5 per cent, and a double-depreciation regime was retained to encourage industrial investment.

Importantly, a major step forward was taken with the abolition of concessional deductions at the payee’s marginal tax rate. This meant that a taxpayer on a high income received a much larger tax deduction for a dependent spouse or child than a low-income earner. Hayden’s introduction of a flat as opposed to a regressive regime was the first major change in sixty years and flagged a more equitable and efficient tax system. This was quite an achievement for Hayden, particularly in the context of a Budget introduced during an economic crisis, and when one considers how little time Hayden had to put the Budget together.

The response to the Budget from the commentariat and the public could best be described as mixed. Writing in The Australian, journalist Paul Kelly noted that ‘the Government has cut its own spending to the bone in a courageous action’.22 An Australian Financial Review editorial argued that ‘there is a lot more courage and creativity in Mr Hayden’s budget than his deliberately unemotional speech suggested’, and went on to say, ‘If it works … then Mr Hayden will be a Treasurer of considerable significance in Australia’s history.’23 The Financial Review’s economics editor, Paddy McGuinness, a former Hayden adviser, described the Budget as an ‘unexpectedly complex and subtle mixture of a conservative fiscal approach with a radical approach to the redistribution of income’.24 The Age also praised it, arguing, ‘For a Government that had appeared to abandon all claims to economic intelligence and political courage, the Hayden budget is realistic, responsible and on the right track.’25 Some of the positivity, however, was misguided. A number of commentators incorrectly predicted that the responsible nature of the Budget made it much less likely that the opposition would force an election by blocking supply in the Senate. Robert Haupt, for example, wrote in The Financial Review on 20 August that ‘Mr Bill Hayden last night produced a budget which will take the battle over economic policy back to the Opposition Leader, Mr Fraser … It seems even less fruitful following this Budget for Mr Fraser to precipitate a general election through the rejection of the Budget.’

The praise, of course, was far from universal. The Courier-Mail thundered in its editorial that ‘Last year the Government spending was wildly extravagant; this year it is still grossly excessive. If the Treasurer thinks a 23% increase represents “the utmost restraint on Government spending” … it is hair-raising to imagine what could happen when the restraints are off.’26 Similarly, The Canberra Times opined that ‘the Treasurer has merely turned what would have been an unmitigated disaster into a smaller disaster’.27

Business was singularly unimpressed, with the 2.5 per cent company tax cut widely dismissed as insufficient. There was an undercurrent to the corporate commentary that implied that business wanted subsidies to get them through this remarkably turbulent period. Probably the most positive business comment came from the chairman of the Sydney Stock Exchange (and future federal president of the Liberal Party), John Valder, who said the Budget was ‘about the best the Treasurer could do in the hopeless circumstances created for him’.28

Perhaps the ultimate compliment came from the Fraser government, which was elected just four months after the Budget was brought down. It was Hayden’s Budget that the Fraser opposition blocked by denying supply in the Senate, with the augmented numbers of the NSW and Queensland parliaments appointing non-Labor senators to replace departed Labor senators. The opposition did not claim that it was blocking supply because of any inherent irresponsibility in the Budget, but because of the continuing fallout from the Khemlani Affair, which predated Hayden’s treasurership. When Fraser was commissioned as prime minister on 11 November 1975, the Coalition senators immediately voted to grant supply in the Senate, approving Hayden’s Budget. In office, the Fraser government made only minor amendments to the Budget, and it remained the government’s fiscal stance until treasurer Phillip Lynch brought down the 1976 Budget. What’s more, the level of government outlays as a proportion of the economy that Hayden bequeathed his successors as treasurer, 24.8 per cent, was not reduced by subsequent conservative governments—the average outlays level over the next three decades was 25.2