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Tuesday, 14 March 1961

Mr HAROLD HOLT (HigginsTreasurer) . - Mr. Speaker, the Opposition has moved a motion of no confidence and I wish, even with the indulgence that the House has already extended to me, that I had a great deal more time at my disposal to deal not merely with the positive side of this story - which I am certain both the House and the country expect of me - but also to deal as effectively and at as great length as I would wish, with some of the criticism which has come from honorable gentlemen opposite. The essence of a no-confidence motion is that the public is invited to say that the Government of the country should be removed from office and that those proposing the motion - the present Opposition - should be installed as the government.

In those circumstances, one would have thought that in the course of the lengthy speeches which have been made by the Leader of the Opposition (Mr. Calwell), and others behind him, some inkling would have emerged by which the public could have judged what kind of policy it might expect from the alternative government which is being recommended to replace the Government now in office. But no listener to this debate could find any policy in the speech of the Leader of the Opposition or in the remarks of any of his supporters who have followed him. One can assume that this is because they have no policy to offer, and indeed I for one believe that to be the case. Because of the warring factions and the personal rivalries which we know are rampant, not only in the ranks of those sitting immediately opposite, but also in the organizational structure of the party - the kind of rivalries which have produced the worst split in any political movement in the history of this federation - Labour, as at present composed, is utterly incapable of governing this country.

One would say that that is the reason why Labour has not been able to produce any constructive policy for what it admits to be a very difficult economic position. But the honorable member for Lalor (Mr. Pollard) has just told us that no good Australian could fail to be disturbed at the situation or fail to do what he could to help. Well, must we assume from the absence of any policy from the Labour Party that it is incapable of offering any policy? Perhaps the true explanation is to be found in a statement which was made by the Leader of the Opposition, in Hobart, on 1 2th February, when he was asked what the Labour Party's remedies were for the current economic difficulties. He stated that it was not the duty of the Opposition to put the Government right, but to expose the Government's incompetence and maladministration. He continued -

Then when the election time comes around it is for- us to offer an alternative policy.

This is the heroic stand-point of honorable gentlemen opposite who, in the words of the honorable member for Lalor, cannot fail to be disturbed by our present difficult economic position. I can remember when we were in opposition and the approach that we made to the problems of government at that time. Of course, we were critical when we believed criticism to be necessary, but at least we tried to propose to the government of the day remedies that appeared to us to be necessary, and when we felt that the Government was moving along the right track we gave our firm support to the policies that it was adopting. This rabble opposite can produce no policy, yet it has the effrontery to urge this Parliament, and the people of Australia, to dismiss a government which has given Australia the greatest decade of progress that it has known and to replace it with a government composed of Labour supporters who to-day are completely incapable of offering any line of policy to meet our current situation!

The Leader of the Opposition was so carried away with the responsibility of making a case without having any policy on which to base it that he offered the following incredible statement, which is recorded in " Hansard ". He said -

Ever since this Government came into office-

That is the Government of which I am spokesman at the moment - it has increased rather than relaxed controls. We have more controls operating to-day in Australia than we had at any period during the war.

That is echoed by the honorable member for Lalor (Mr. Pollard). The Leader of the Opposition says we have more controls operating to-day than at any period during the war, but has he forgotten price control, capital issues control, commodity control and control over buildings? Because it means nothing in the eyes of Labour, he has completely forgotten the conscription of labour, which most Australians would regard as the worst control of all to which to be subject. Those were the controls operating in this country in the years of war. They were necessary, no doubt, in the circumstances of war, but whether all the extremes to which the Labour Government lent' itself at that time - the control over the length of a shirt or the colour of the icing on a cake or absurdities of that kind - were necessary is another matter. But at least the country did surrender its freedom in a period of war in order that we might do what was necessary to make our contribution to the war effort. But here, in a period in which Australia is enjoying a degree of prosperity and freedom, over this last decade, which makes us one of the envied countries of the world, we are told by this alternative government that we have been subject to worse controls than applied at any period during the war.

By the irony of circumstances, the honorable gentleman, having said that, immediately proposed another control, over imports, which this Government jettisoned in February of last year; and I will come to that a little later. The honorable gentleman took us back to the halcyon days of 1949. What a wonderful state the country was in, he said, when his party handed over government, by the decision of the electors, to a government from this side of politics. Some of us can recall - I know the people can recall - the events of 1 949. They can recall the blackouts, strikes, shortages and the rationing of commodities. They recall the rationing of petrol and butter and other items which are sMH vivid in our memories, when we had to wait for a ship to struggle around the coast in order that the housewife might get enough coal to cook the roast for dinner. We have not forgotten the inflation of those days. Honorable members opposite talk as if inflation was some new event. In the last two years in which Labour was in office inflation was running at 9 per cent, a year and it had reached 10 per cent, in the last year during which Labour was in government before we took over. Now, members of the Opposition try to hold this up to us as an ideal state of affairs which we inherited from them. The Opposition has found a new champion these days in Sir Douglas Copland, although he used to attack members opposite in those days because of what he described as " a milk bar economy " with plenty of froth and bubble at the top but no solid foundation. We used to have to import coal to meet our needs but now we export millions of tons of coal. We were short of steel, of bricks and timber and all the other basic necessities to go into an expanding economy. That was the state of affairs when honorable gentlemen opposite were in charge.

I am not going to devote more than a small portion of my time to-night to dealing with the kind of criticism we have had from those sitting opposite to us; but that is a fair sample and I have given direct quotations of what the honorable gentleman has said. We have other critics, and sometimes they tend to cancel out. The honorable member for Lalor has just been attacking us because we allowed interest rates - he says - to go too high. We have another group of critics - financiers and editors and spokesmen for some particular interests - who attack us because we have not allowed interest rates to go higher than we have. There are spokesmen for sectional interests also. The Chamber of Manufactures wants one thing and the Chamber of Commerce wants the opposite, when it comes to import control. We have the professional critics and, of course, we have the press. A government is always fair game for the press, but the press, or some sections of it, does not always play the game fairly.

We have no more harsh or persistent critic than the " Australian Financial Review ", a subsidiary of the " Sydney Morning Herald ", and I will give one illustration of the kind of criticism which I say is quite dishonest and is designed not to help the public to an understanding of our present situation but to hinder that understanding. I have here the issue of the " Australian Financial Review " of 2nd March. Here we see the headline, " Victims of the Squeeze ", and under it runs the passage, " The table below shows how industrial production fell in the last two months of 1960. On the left it shows by what proportion production fell between November-December, 1959, and 1960. The right-hand column makes the same comparison for December months." It is all set out in these columns. Anybody reading that article would assume that what had happened to production in December was a fall in all these directions and that that was- the general story of production in December. Indeed, the table is a virtually incomplete listing of the items in the Statistician's monthly bulletin of production statistics. Those items show decreases between the periods concerned, but no increases in production are shown.

Worse still, no hint is given that there were any increases, and the majority of the readers of the " Australian Financial Review" were left with the impression that it was clearly indicated that output had declined in a widespread and comprehensive fashion towards the end of 1960. In fact, total production in November and December undoubtedly continued to run well ahead of that of the year earlier. There were many individual declines, as is mentioned, and as there always- will be in a flexible economy. If production of items for which demand was slackening did not fall it would be impossible for there to be a large increase in areas where demand was running more strongly, but the significant thing is that in the period under review there was a bigger list of rises in production than of falls and they were largely in the more basic items of production - steel, coal, electricity and chemicals - which are absolutely basic to the industrial expansion and development of a country.

I have given only a few of these illustrations of criticisms to show that it is by no means easy for the public to get a fair and accurate picture of what is happening; and part of our difficulty, in what honorable gentlemen opposite acknowledge to be a complex and difficult situation for Australia, is to get the facts clearly and fairly over" to the people of this country. The Government has access, as it should, to more authoritative and accurate information than any of its critics can hope to have. Indeed, it would be an indictment of the Government and of its administration if that were not the case. We have information from all the various Government sources. We have the resources of the Statistician and of all the organizations which supply us with material - organizations either privately or publicly conducted - and from the State governments, and a vast amount of material from overseas. We are able to draw on some of the most experienced administrators to be found anywhere in the world in the realm of financial administration of government. We have, ourselves, no small experience now, going back over many years, of the business of trying to keep the economy in balance; and so I say that we are at least entitled to claim that the judgments which we reach are based, first, on the best information available to any group of people in this country. They are assisted by advice from the most able and experienced administrators to be found in this country; and when we come to apply our own judgment we bring to bear experience now going back, in the case of the Prime Minister (Mr. Menzies) and the Minister for Trade (Mr. McEwen) and one or two others of us, over the best part of a quarter of a century of government in this country, of which more than half has been spent actually in the administration of the affairs of government in Canberra. I say that not without some sense of pride in what has been achieved, notably in the last ten years in which Australia has surged forward in such a remarkable fashion. The economy of any country is never easy to hold in balance, as I am sure any Treasurer would agree, and certainly the economy of Australia is rather more difficult than that of most other countries to keep in balance. And we do not have to seek far for the reasons for that. We are a great trading nation, despite our comparatively small population. We rank amongst the first ten or twelve trading nations of the world, and we rely largely for our export income upon the products of our primary industries. They, in turn, are subject to wide fluctuations in volume of produce - it varies according to the seasons - and they are subject to wide fluctuations in price. It has been our uncomfortable experience over the last ten years that the prices we have been getting for our export commodities have been moving steadily against us.

The people have not been made to feel the full effect or discomfort of this in Australia because we have been assisted over those years by a strong capital inflow, by some overseas borrowings and by a process of internal adjustment of policy designed to lessen the shock from time to time. But the process has been going on. and when we talk of a decline in terms of trade from a base of 100 in the not abnormal post-war year of 1953 to a base of 65 in the September quarter of last year, it represents a decline not surpassed by any substantial country that one could point to anywhere around the world. To get any sort of comparison on unfavorable movements in terms of trade over that period, we turn to the South American countries where they stand at a base of 83 as compared with a base of 100 in 1953. I think New Zealand is at about 93 or 94 as compared with that year. The United Kingdom is well over 100, as are the United States and most of the countries of western Europe.

Mr Cairns - Are you trying to correct it by bringing in unlimited imports?

Mr HAROLD HOLT - No. The honorable member will please not try to distract me from my line of thought because I believe it important that every Australian should appreciate the fact that when we, as a government and a nation, have to adjust our economic situation to movements in terms of trade of that sort the process is no more painless than when an individual is required to adjust himself to a decline in income from, say, multiples of £1,000 a year to multiples of £650 a year. Such a person might soften the effect of the process by doing some borrowing, or by obtaining assistance from friends or by some other piece of good fortune, but, basically, his situation has changed from a relativity of £1,000 to a relativity of £650.

Putting it in another way, the £880,000,000 which we expect to obtain from export income this year would have been £1,300.000.000 had we sold the same volume and kind of goods in 1953, and we would not be arguing about balance of payments problems at the present time. To put it in still a third form, it takes us 50 per cent, more by way of exports to-day to buy the same volume of goods that we could have bought in 1953.

Mr Cairns - That is because of inflation.

Mr HAROLD HOLT - The honorable member cannot get around it that way. It is not the product of inflation. I am speaking hi terms of the same kind of currency. I mention these things as some background to our study of the situation.

This Government has experienced a type of criticism which says that the Government is constantly changing its policy. That kind of criticism reveals a lack of awareness of just what we have set out to do. What must be clearly understood by the Australian people is that this Government has never wavered in its economic objectives from the time it took office in 1949, and ours are objectives which commend themselves to every thinking Australian. I believe they are objectives which would enjoy the unanimous support of honorable members opposite.

After the war, the Australian people were determined to grow in strength and in numbers. The then Government set about achieving that objective, and set about it briskly. We have continued with the task, and this country has grown and developed. We have maintained a planned programme of immigration, and that is what the people of Australia expect of us. They know that this imposes some strain upon us, but they recognize the great benefit the country will derive from it.

Secondly, we were determined - and the honorable member for Lalor (Mr. Pollard) need not think he has some copyright over this - that employment should be kept high. Indeed, even the ambitions of honorable members opposite did not reach the point we have succeeded in maintaining in the years in which we have been in office. The honorable member for Lalor talks about his party's producing a white paper on full employment. I remember that white paper. I remember a prominent spokesman - he is now on the front bench of the Opposition - who announced at that time that the Labour Party regarded as a reasonable standard of full employment a position at which employment was within 5 per cent, of total employment. I do not criticize him for looking upon that as being substantially full employment. In the light of our experience in pre-war years, that seemed a very successful achievement. But would he or any other honorable member opposite have thought that we would experience a period during one government's term of office in which unemployment registrations alone - not just unemployment because, against unemployment registrations are also registrations of vacancies waiting to be filled - did not go beyond 2 per cent, at any time in ten years? Of course we have pursued a full employment objective, and we have succeeded in getting employment up to a sustained level not surpassed by any industrial country in the world over the last ten years. Furthermore, we have no intention of marring that record, whatever the difficulties confronting us now may be.

There are some of us - I for one - who came into this Parliament in the years of depression when a Labour Government had been trying to cope with a boom and bust experience that we are determined to avoid on this occasion. In those days, too, the Labour government had railing export income. It had a loss of confidence inside Australia, and it experienced a drying up of overseas borrowing. Out of that situation Australia experienced a boom and bust which produced a great deal more discomfort and hardship than is being experienced to-day. At that time, the hardship was a thousand times greater than any being felt to-day. As against the relatively minor registrations to-day, 30 per cent, of registered trade unionists were unemployed at that time. We have learned some lessons, I hope, from that unhappy past, and certainly no government representing this side of the House intends to allow such a situation to recur.

But we have other objectives as well. For instance, we 'have had as an objective higher social standards, and we have succeeded in achieving them. We have also had as an objective an adequate rate of home construction. Recently I invited a deputation from the Australian Council of Trade Unions to tell me of any country where a greater number of homes is available to the people than in Australia or where there is a more rapid rate of home construction in relation to population than we have had in these last ten years. I invite any honorable member opposite to name one country where home construction has been at a rate more rapid in relation to population than in Australia.

Mr Bryant - What does that prove?

Mr HAROLD HOLT - It proves that we have been getting on with the job and doing the things that the Australian people want tis to do. Finally, the Australian public has expected of us that somehow. within this framework of declining terms of trade and of great aspirations which the Australian people were determined to have fulfilled, we should at the same time keep a grip on costs and prices. If over the years we have been found to have erred, it has not been in the direction of falling down on these other objectives which have spelt human happiness and great progress for the nation. We have allowed some inflation to occur. We regret that. We have been doing our best to hold inflation in check. But we have had no help from honorable gentlemen opposite in the performance of that task. Every time we have brought down in this House a measure designed to check inflation, it has been savagely attacked by honorable gentlemen opposite, who have tried to make some political capital out of it.

Mr Ward - What measures have you brought down?

Mr HAROLD HOLT - The honorable member for East Sydney asks what measures we have adopted. I mention this because we have been told that our November measures were a belated attempt to correct the situation. We could see inflationary pressure getting under way towards the end of 1959 or early in 1960, and we announced four important measures. The first was to avoid deficit finance. The second was to intervene to tell the Commonwealth Conciliation and Arbitration Commission of the reasons why we felt there should be no increase in the basic wage and therefore no costs pressure. The commission saw where that process was leading and made the announcement then that it would have been dangerous to have granted at that time an increase in the wage level.

Thirdly, Sir, we announced that we were removing import licensing from a body of imports which at that time were under licensing control. Already by February more than 50 per cent, of our imports were running virtually free of control. We freed a great many more. We also said, though, knowing that these things could not be done unless they were associated with a programme of internal restraint, that we gave support to the policy of bank restraint which had been announced by the Reserve Bank. I stress this, because the Leader of the Deposition in his speech said that we did nothing about bank advances, that we suddenly awoke in August to the fact that matters were going wrong, as far as bank advances were concerned. In February, we made it clear that we supported the policy of bank restraint. From then on we kept in contact with the banking system.

Mr Ward - The banks took no notice of you.

Mr HAROLD HOLT - It was not that they took no notice; but just as we .have learnt some lessons from the depression experience of the 'thirties, we have learned at least one lesson from our experience of last year. We have learned that when banks have large, outstanding overdraft commitments, which have not been drawn upon sometimes for a lengthy period, they are not able to maintain the same control over their advances as they would wish to maintain and certainly as the Reserve Bank would wish them to maintain. In the result, bank advances increased by over £150,000,000 between January and October - the highest increase over that period in any year since our records have been kept.

Then, in the Budget of August, we introduced the measures which were to have some deflationary effect. We increased income tax on companies and on individuals. But such was the boom psychology and the strength of optimism in the commercial community at the time, that this was just swept aside by the tide of speculation, the demand for imports and the other features of that period which are so familiar to honorable gentlemen. We decided in November, therefore, that even firmer measures of restraint had to be applied. We have had no assistance from honorable gentlemen opposite in that task. It is true that they have been very vocal in their criticism, but they have made no attempt to suggest any positive remedies. Indeed, the only remedy that they have proposed is that we should restore import restrictions. That is very interesting, coming from a party - I remind the Leader of the Opposition of this - which, at the 1958 election, announced as its policy on this point the replacement of import restrictions with the application of tariff measures. That is precisely what this Government set out to do when it removed import restrictions in February of last year.

We believe that we should not have such an arbitrary control as import licensing - a bad control which was acknowledged by every one as working unfairly, which produced all sorts of anomalies, which led to racketeering and which is contrary to fair practice, except in the exceptional circumstance of balance-of-payments difficulties, in our arrangements with other governments around the world. The Acting Prime Minister, in his capacity of Minister for Trade, has repeatedly stressed that few countries have a greater interest than Australia in ensuring that fair trade practices are maintained around the world. We, as one of the great trading nations, want the channels of world trade kept as free from artificial restriction as can be contrived. We cannot expect other people to do these things if we are not prepared to play our own part.

Now, Sir, we do have the obligation under the General Agreement on Tariffs and Trade not to maintain import restrictions except for balance-of-payments purposes. It is clearly contemplated under that arrangement that any such restrictions shall be of a temporary order only. Indeed, we have to consult with the Gatt organization annually while such restrictions last. We are constantly under supervision to see that we are taking the necessary corrective measures. These obligations cannot be lightly brushed aside. Honorable members, spokesmen for the Chamber of Manufactures and others seem to believe that all we have to do is to re-impose import licensing, that all will then be well and that licensing can remain indefinitely. Of course, it cannot remain indefinitely unless we are prepared to divest ourselves of the arrangements T have mentioned, and that certainly would not suit Australia.

We have made our position very clear. The Government has said, through the Prime Minister, the Minister for Trade and myself, that having rid ourselves of these restrictions to the extent that we have, it is not our intention because difficulties confront us at this time to return to a process of import control. I understand something of the psychology that is abroad at this time. I know, as do my colleagues, that there are businessmen and spokesmen for these business organizations who say that some return to import restrictions is inevitable. So they say, " We will increase our imports and so build up the basis on which we will be allowed to operate at some future time ". There are importers who are doing that, we know, and there are manufacturers who are building up stocks against the day when they think import restrictions will return. I say that the Government will do everything humanly possible, having got rid of these restrictions, to ensure that this country is able to stand among the great trading nations of the world - and not in a sheltered and artificial situation which offers no promise for national expansion.

Those who think that if ever a government were required to introduce import restrictions because of a balanceofpayments situation of a temporary or other character it would be impressed by the fact that in our hour of difficulty they made our situation worse by importing to a greater degree than was necessary, or holding stocks to a greater degree than was necessary, are guilty of committing a folly which they will find working painfully against them should they ever have to be measured by their deeds of the past.

Mr Cairns - ls not that free enterprise?

Mr HAROLD HOLT - We in Australia live in a situation in which there is a large measure of government activity, of course, but the great difference between Opposition members and ourselves is that they are dedicated socialists. They want the regimented state. They want to put industry in shackles. They regard controls of the sort that operated during the war years as normal - so much so that, as I said earlier, the Leader of the Opposition lightly says that what is happening now is worse than what we knew in the years of war. We, on the other hand, know that within the Australian economic and administrative situation there is a place for government enterprise in the great public utilities that are conducted here. But, at the same time, there is much scope for a spirit of enterprise and for the energy, vigour and drive that the individual can bring to bear towards meeting the needs of this country. It is our purpose to sustain that spirit of enterprise. It is the purpose of honorable gentlemen opposite to crush it and shackle it so that the state shall be all-powerful and the individual shall count for very little in our affairs.

The test of what we did in November and earlier is this: Are these measures working out? There is nothing comfortable about bringing a boom to a halt. Many people are put to a disadvantage and many are hurt when a boom is brought to a halt but, as I said earlier, if a boom is allowed to go on to a condition of bust, for every person who is put to disadvantage by this Government's measures, there will be thousands subjected to hurt and hardship. That would have been the position if we had allowed a condition of bust to emerge from the boom crisis which was developing around us. As a result of our measures, we have been able to reduce the pressures which were evident in the economy.

Time will not permit me to go into the details, but it was clear that boom conditions existed in the motor industry. It was clear that boom conditions existed in the building industry, particularly in some States. It was clear that boom conditions had developed with respect to speculation in land and other forms of speculative activity. Share prices had rocketed because of these speculative processes. We found that even commodities so basic as are steel and timber were being imported because the supply could not be sustained in this country. We found that labour had reached a point at which job vacancies exceeded the supply of labour in great areas of the economy. The flow of imports had mounted to flood proportions which we could not hope to sustain, and bank advances, as I mentioned earlier, had reached record levels.

All these are very important factors in the Australian economy. With respect to all these factors, the pressure has now eased. We have been able to bring the situation under a greater degree of control, and I am quite certain that the thoughtful Australian who looks about him at this time will agree that we have a very much healthier tone in the community and a much sounder base for the kind of continuing progress that this Government is determined to ensure. We have not introduced these measures in order to halt the steady expansion of the last ten years. What we have been determined to do has been to produce conditions under which that progress can continue.

I believe, Mr. Speaker, that just as the fifties produced the most fabulous decade in the history of this country so far, the sixties will see even greater achievements for the Australian nation. But we have to recognize that there must be a shift of emphasis. In the 'fifties, we were able to look to a rapid expansion of our manufacturing industries to absorb most of the new labour coming on the labour market, whether from migration or from the natural increase of our population. But we do not want to see the same measure of building-up about Melbourne and Sydney, and even other capital cities, that was apparent in the rapid industrial growth of the 1950's. We want to see a greater spread of industrial activity throughout Australia. We recognize that our manufacturing industries are now drawing so heavily on imports for the purpose of sustaining themselves as to make it necessary that we build up our export income. So an important and, indeed, major element in the policy approach of the Government at the present time is the decentralization of development and of industrial achievement in this country in order to encourage our export industries to grow and to produce a bigger income for us. Therefore, we have announced major developmental projects, most of them with an important export objective which will immediately be realized when we get them going. These projects will have useful effects on export income in other directions also.

This is the kind of advancement that 1 am sure the Australian people generally, and not just those who live in a few capital cities, want to see achieved. This kind of advancement sustains faith in Australia's future in the eyes of commentators abroad while our critics at home are doing their best to preach calamity and to knock the efforts of this Government to find a cure for our economic situation. I invite honorable gentlemen opposite to produce one notable overseas commentator who has studied the Australian scene in recent times and who has not commended what this Government has been doing in order to keep the economy in balance. The flow of capital into this country remains strong despite the cries of the calamity howlers. In the last couple of days we have been granted a loan by the Swiss banking system, the Swiss being some of the most canny and observant investors to toe found anywhere in the world. Does that suggest any lack of confidence either in Australia's longterm future or, indeed, in our immediate capacity to handle the current situation in this country?

Finally, Sir, I say this: The Leader of the Opposition was glad to quote the London " Times " in order to bolster his case. Let me quote from the issue of 2nd February of the " Financial Times " - an even more authoritative journal in these matters. Dealing with import restrictions, it stated -

Any attempt to tackle the problem by the reimposition of import controls would merely deal temporarily with the symptoms while aggravating the disease in the longer term, a fact which is well appreciated in Canberra.

The " Financial Times " concluded - . . whatever economic difficulties she may be facing at present, Australia remains a highly prosperous and in the long run an expanding market.

That, Sir, is the verdict of the knowledgeable critic overseas. It is the verdict of thoughtful Australians, and while they believe that and have faith in this Government, the motion of no confidence which the Opposition has produced will receive the treatment it deserves, not only, as I confidently expect, from this House, but also from the people of Australia when they come to give their judgment.

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