XN000022-1990-06-07 — Page 3

THURSDAY, JUNE 7, 1990

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TURNING TO THE QUESTION OF WHETHER THE PUBLIC EXPENDITURE WAS OUT OF CONTROL, MR MACLEOD SAID THE CURRENT SITUATION COULD NOT REASONABLY BE DESCRIBED AS SUCT.

HOWEVER, HE STRESSED THAT IT WAS CLEARLY NECESSARY TO LOWER THE RATE OF GROWTH SIGNIFICANTLY OVER THE NEXT TWO OR THREE YEARS, PARTICULARLY RECURRENT EXPENDITURE.

SECTOR TERMS,

FIGURES IN THE LAST BUDGET SHOWED THAT PUBLIC EXPENDITURE IN 1990-91 WOULD BE UP OVER NINE PER CENT IN REAL ROUGHLY THE SAME PERCENTAGE WHETHER FOR RECURRENT OR CAPITAL EXPENDITURE.

"LOOKING BACK OVER THE 80'S, WE HAVE KEPT PUBLIC SECTOR EXPENDITURE SLIGHTLY BELOW GDP GROWTH, PERHAPS HELPED SOMETIMES BY HIGHER THAN EXPECTED GDP GROWTH, ESPECIALLY IN 1986 AND 1987.

"LAST YEAR WAS THE FIRST SERIOUS WARNING SIGNAL, WHEN PUBLIC SECTOR EXPENDITURE INCREASED BY SOME 13 PER CENT IN REAL TERMS.

"AND INDEED A WARNING WAS SOUNDED IN THE 1989-90 BUDGET SPEECH THAT WE WOULD NEED TO BE INCREASINGLY VIGOROUS IN OUR ATTACK ON BASELINE EXPENDITURE," HE SAID.

MR MACLEOD EXPLAINED THAT IN THE PERIOD TO 1993-94, ALTHOUGH PUBLIC SECTOR EXPENDITURE WOULD BE LOWER, AT 6.6 PER CENT EACH YEAR, IT TOO WOULD STILL EXCEED THE GUIDELINE OF 5.5 PER CENT, THE TREND GDP GROWTH RATE.

WHILE THE GOVERNMENT DID NOT EXPECT TO KEEP WITHIN THE GUIDELINE EVERY YEAR, IT WAS IMPORTANT THAT THE GOVERNMENT DID 90 OVER A PERIOD OF YEARS, HE SAID.

"AND THE NINE PER CENT PLUS GROWTH FIGURE WAS RIGHTLY TAKEN US AND OTHERS AS A WARNING SIGNAL THAT SOME CORRECTIVE ACTION NEEDED, HE SAID.

MR MACLEOD REITERATED THAT TO DATE THE AIRPORT PROJECT WAS A MAJOR REASON FOR THE INCREASE IN EXPENDITURE.

"IT HAS OF COURSE RESULTED IN SOME EXPENDITURE, BUT THE MAJOR PROVISION WILL BE

LATER.

BY WAS

NOT

RECURRENT AND CAPITAL NEEDED IN 1991-92 AND

"WE HAVE SAID THAT WE ARE LESS CONCERNED IF THERE ARE TEMPORARY LUMPS OF CAPITAL EXPENDITURE WHICH TAKE US OVER OUR GUIDELINES

CAPITAL IS ONLY ONE THIRD THE SIZE OF RECURRENT EXPENDITURE, AND LESS PERMANENT - BUT NATURALLY WE WISH TO KEEP SUCH LUMPS TO THE MINIMUM, SO AGAIN THE CONTROL IN CAPITAL RESOURCE ALLOCATION FOR 1991-92 WILL BE PARTICULARLY TIGHT, HE SAID.

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