`Mini-budget' brings on a snap election

Bouyed by favorable public reaction to his government's recent economic decisions, Australian Prime Minister Bob Hawke this past week called a snap election for July 11. The elections for Australia's House of Representatives and the whole of the Senate will be held some six months ahead of schedule.

Mr. Hawke justified the early election by citing opposition in the Senate to some of his Labor government's legislation, in particular to a bill to create a national identity card system that is meant to minimize tax and welfare frauds. He also pointed to deep division within opposition parties, which were split on taxation policies and leadership.

But the main factor behind his decision was a batch of recent public opinion polls that showed substantial support for a major expenditure cutting exercise produced by Australian Treasurer Paul Keating. Mr. Keating's ``mini-budget'' cuts $4 billion (Australian - US$2.9 billion) from the projected federal deficit for the year, reducing the prospective budget deficit in the 1987-88 financial year to less than 1 percent of gross domestic product, or about A$2.8 billion. He achieved this by a series of cuts to social welfare, health, and defense expenditures, sales of government assets, and cuts to grants to the states.

The electoral backlash has been low because Keating targeted spending areas in which many voters believe the government has been too generous. For familes whose incomes are over A$50,000 a year, for instance, payments of family allowances have been abolished. Unemployment benefits to 16- and 17-year-olds have been effectively halved and replaced by job search allowances.

The easiest cuts made by Keating were to the defense budget, where he saved A$350 million by reducing the budget from 3 percent real growth to a 1 percent real cut in next year's expenditure. Assets to be sold under the Keating program include airline terminals, defense establishments, and factories that are losing money.

At a state premiers' conference this past week, states complained about having A$1 billion removed from federal grants to the states and another A$1 billion from their loan funds for the coming year. But all accepted the need for the federal government to take tough measures to help restore the economy.

The message that Keating and Hawke kept pushing was that falls in international commodity prices - particularly for wheat, sugar, and minerals such as coal and iron ore - had cost the nation some A$9 billion in income and this had to be reflected in lower living standards.

These reduced living standards have not had much effect on the man on the street. Indeed, the Labor government's popularity has increased as it has set to work with tough economic measures.

Earlier this year, the government was trailing the combined opposition vote in the polls. But after Keating's statements, the government's popularity has stabilized at about 49 percent of the vote, some five percentage points ahead of the two main opposition parties.