Canberra, 19 July 1966
Confidential
Treasury analysis of submission no. 349: Grant for Papua and New Guinea Administration1
The Minister for Territories is seeking an initial Commonwealth grant of $72.9 million for the Administration of Papua and New Guinea in 1966–67. This is $10.9 million or 17.6 per cent greater than the grant in 1965–66. The figures for 1966-67 make no allowance for the basic wage increase but the Minister has foreshadowed that he may seek a supplementary grant towards the cost of this increase and an expected increase in local wages.
Grants to the Administration have increased as follows:—
| Grant $m. | Increase Over Previous Year $m. | |
|---|---|---|
| 1959–60 | 25.6 | 2.6 |
| 1960–61 | 29.6 | 4.0 |
| 1961–62 | 34.6 | 5.0 |
| 1962–63 | 40.0 | 5.4 |
| 1963–64 | 50.5 | 10.5 |
| 1964–65 | 56.0 | 5.5 |
| 1965–66 | 62.0 | 6.0 |
| 1966–67 (Requested) | 72.9 | 10.9 |
Last year, at this time, we decided on a grant of $62.0 million (Decision No. 1086(M))2 after considering two submissions one of which related to a special programme of recruitment and housing of overseas officers. The Ministry noted the Minister’ s recruitment and housing proposals but did not record a definite conclusion. In these circumstances it can hardly be implied, as is done in paragraph 6 of the present submission, that the Government has approved specific programmes for expatriate recruitment and special housing.
The grant of $62.0 million to the Administration for 1965–66 enabled the Treasurer of the Territory to present to the House of Assembly last year a budget totalling $102.3 million of which the Commonwealth grant accounted for 61.5 per cent. We are now being asked to approve a grant of $72.9 million toward a total budget of $121.8 million. The proposed expenditure in 1966–67 is some 18 per cent greater than estimated expenditure of $103.4 million in 1965–66.
I think we all recognize the need to push ahead with the development of Papua and New Guinea and that, as a consequence, our contribution to the Territory will continue to increase year by year. I must say, however, that I entertain considerable doubt as to whether the direction of proposed expenditure in 1966-67 is giving sufficient priority to the need to develop the economy of the Territory. ‘Economic’ expenditure is estimated to absorb 31.4 per cent of total expenditure in 1966–67—a fall of 1 per cent compared with 1965–66. This seems to me to be a movement in the wrong direction, particularly as the Bank Mission suggested that average expenditure on the ‘economic’ sector should represent about 34.7 per cent of total expenditure. The Minister’s claim that a substantial part of housing expenditure (which is included under the classification of ‘Social Services’) relates to economic development does not affect this comparison. Expenditure on the ‘Social Services’ function (including housing) which the Bank Mission suggested should average 31.6 per cent of total expenditure is expected to increase in 1966–67 from the estimated actual 1965–66 figure of 32.1 per cent to 33.9 per cent. These figures suggest to me that a more determined effort should be made to shape the expenditure patterns from the Budget to accord more closely with those put forward by the Bank Mission which laid special emphasis on the continuing need for economic development rather than the expansion of welfare services.
Of the $18.44 million increased expenditure, the following major items, which have been approved specifically by Cabinet or are special commitments in the nature of salaries and conditions of employment, account for $5.26 million (as mentioned in paragraph 3, Cabinet has not approved specific programmes for expatriate recruitment and housing).
| Estimated Increases over Expenditure 1965–66
$m
—|—
Papua/New Guinea Development Bank| 1.00
Papua/New Guinea University| 1.69
Institute of Higher Technical Education| 0.59
Police Constabulary|
—conversion to full cash payment and improved allowances| 0.90
—improved quarters| 0.38
Overseas Officers|
—application to the Administration Public Service of salary adjustments for Commonwealth Third Division officers arising from Determination No. 104| 0.70
[total]| 5.26
If the ‘committed’ expenditure of $5.26 million is deducted from the proposed overall increase of $18.44 million, the balance of $13.18 million would represent an increase of 12.7 per cent over the actual 1965–66 expenditure figures. This in itself is quite a sharp rate of increase.
Although I appreciate that the needs of the Territory must inevitably make increasing demands upon us, we must, I suggest, look carefully at the rate of increase in those demands. In this context, I may say that it is encouraging to note that a Bill is now before the local House of Assembly which, if passed, will lift the Territorial revenues from income taxation by collecting more from the indigenous population. The expected increase in revenues on this account in 1966–67 is put at $750,000. But I also observe that the Minister is foreshadowing a supplementary grant to meet the costs (as yet unknown) of the local wages case and the effects of the national wage case (roughly estimated to cost about $580,000 gross).
All in all, I think that at this stage we would be doing justice to the Territory’s claim on our bounty if we were to make a grant towards a budget based on a 10 per cent increase on actual expenditure in 1965–66 plus $5.26 million for the ‘special’ expenditures listed above. This would mean a Territory budget of $118.9 million for 1966–67. Since it is estimated that internal revenue and loan raisings will contribute $42 million and $6.94 million respectively, a grant of $69.96 million would be required. If we round this up to $70 million our contribution would be 59 per cent of a total budget of $119 million.
I recommend approval of a grant of $70 million to the Territory Administration for 1966–67.3
[NAA: A5841, 262]
1 Document 47.
2 Not printed.
3 Cabinet accepted this recommendation on 20 July (Cabinet decision no. 370(M), NAA: A5841, 262).