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Thursday, 5 December 1974

Mr SPEAKER -Order! The right honourable member for Lowe will not interject.

Mr McMahon - Sir, heis not telling the truth.

Dr J F Cairns (LALOR, VICTORIA) - The right honourable member is becoming very petulant lately. The figure for 1973 shows a decline in the rate in favour of Australia. The 12 months to September 1 974 show a further decline. The ratios are sometimes like 1.23 in 1972, 1.23 in 1973, and 1.13 in 1974. It is obvious why this decline has taken place. I have tried to point out in comparing the rates of inflation in Australia and the OECD and the rest of the world, especially before the last election campaign when I compared the quarter that had shown a decline in Australia, that I was using that comparison solely in relation to other countries. The reason for that higher rate of inflation in Australia in the early stage was that Australia experienced an export boom. Exports rose by over $2,000m in 1972 and because of the fantastically high level of capital inflow, which was over $3,000m, more than $5,000m of new money was available for expenditure in Australia. That comprised a very large base for the Australian banking system. Whatever the right honourable member of Lowe happens to say about this situation, the statistics are clear. The rate of increase in money supply, particularly M3, showed an increase all the way through 1972 reaching, I think, the highest quarterly percentage increase in December 1972 in Australia's history up to that point. It was 24.9 per cent.

Mr McMahon - True, but you could have taken action in March 1 973.

Dr J F Cairns (LALOR, VICTORIA) -Well, I am describing 1972. 1 am glad that the right honourable gentleman now agrees with me because the impression I obtained last week was that he disagreed. The rate in Australia was high at first because of the extraordinarily high boom in this country and the capital import boom compared with any country of the OECD or with any other comparable country. That shows where inflation came from; it came from outside, as the Prime Minister so clearly said in answer to questions a few minutes ago. On the other hand, now that inflation is like that- inflation is international and it is part of the international system; a one world economic system- the responsibility of dealing with inflation lies upon Australia. The Government has to play a leading role in that responsibility. In order to do this it is necessary for the community to understand both the causes and the origins of inflation if we are to be able to co-operate in the best possible way to achieve its control.

It is no good the Opposition trying this argument that inflation is simply Australian in origin; it is not. It is, of course, proper for the Government and everybody else to point out that the primary responsibility for dealing with inflation lies on the Australian people. Unless we can maintain a rate of income increase right across the board and for every section that it is possible for the economy to handle and possible for different sections of industry to handle, we will not regulate inflation. At the same time, we must be equally committed to understanding that inflation cannot be suddenly dropped by 5 per cent or 10 per cent; that would cause economicchaos. It is possible without economic chaos to regulate inflation only gradually. At the same time, wherever unemployment does show up, where productive resources can be used to turn out goods and services onto the market, the Government and the community must be determined to see those resources are used, and that there is no unemployment as a result.

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