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Tuesday, 7 December 1976
Page: 3413


Mr YOUNG (Port Adelaide) -Just one week ago a number of honourable members on this side of the House and one right honourable member on the other side of the House, the right honourable member for Lowe (Mr William McMahon), predicted that this decision would have to be taken and taken quickly. This decision obviously should have been made with the decision to devalue. It is not a decision we support but, with the devaluation, any reasonable person would have suggested to the Government that this decision had to be taken, but not in this form. Nevertheless the decision has been taken and it warrants some comment from the Opposition.

The Liberal Government made its grab for power on the basis that it could provide the economic management which Australia needed to meet the problems of inflation and unemployment. It claimed that these problems were the results of mismanagement by the Australian Labor Party Government. These problems which Australia faced in 1974-75 were a reflection of the state of our principal trading partners. These problems are still faced by Australian industry. Where is the Government's White Paper arising from the Jackson Committee report on manufacturing industry which would show Australian industry the means by which it could arrest its competitive decline?

There can be no doubt that devaluation has removed many manufacturing industries from the grey area of uncertainty which existed prior to the Government's announcement. As I have stated on many occasions, it was not the sole responsibility of wage and salary earners to accept the burden of getting industry out of its plight. The Government is always keen to name those whom it says are carrying an unfair share of the economic burden. Then the Government mentions the mining companies and great rural interests.

On our side of the House we believe that those, who through government policies have lost thenjobs or the school leavers who have no hope of finding a job, are the people carrying an unfair burden. One might ask: How does this spate of ad hoc economic decision making affect the livelihood of the working people of this country. Devaluation has been exposed as a grossly incorrect economic decision. It is further exposed as such when now, 9 days later, we are debating a further decision on tariffs and revaluation.

The tariff question should have been thought out before devaluation. If devaluation were necessary it should have been announced at the same time to avoid the mass confusion which has arisen. Devaluation, of course, in essence means the following to Australian industry: Substantial increase of protection for Australian industry; those industries using imported materials and components will have to adjust to the cost impact of those imported goods; and exports of manufactured products will become more competitive. Other countries such as the United Kingdom which have recently devalued will still offer strong competition but our industries should compete on more favourable grounds with countries such as Japan and the United States. When one looks at the nominal rate of protection from 1968-69 to 1974-75 and then looks at the impact that devaluation has had upon those rates, one can readily ascertain the gigantic hike in tariffs which takes place following such a massive devaluation.

In 1 968-69 the average rate of tariff was 24 per cent. In 1974-75 it was 17 per cent. To get the same effect as a devaluation of IVA per cent a tariff rate of 17 per cent would have to be increased to 42 per cent. For instance, to use the figures of the relevant Department, a 10 per cent tariff rate following upon the 17& per cent devaluation goes to 33 per cent; 20 per cent goes to 45 per cent; 30 per cent goes to 57V4 per cent; 40 per cent goes to 70 per cent; and 50 per cent goes to 82 per cent. As I have stated previously, the gains are greatest immediately. But there are many factors which could quickly alter that position such as other currency changes, increases in local costs, inflation rates, and policies of countries exporting to Australia. Let us look at local costs. Some industry associations have been opposed to any change to tariffs following devaluation. They see this as a time to adjust and to consolidate. However, the longer cuts are put off the sooner the enormous increase in the cost of our imports will be channelled into the consumer price index. The Treasurer (Mr Lynch) said that it would be difficult to quantify the change in the CPI following devaluation. However, a jump in the inflation rate of about 5 per cent could be expected during 1 977.

I pose the question to those industries opposed to tariff alterations: Are they prepared to live with an inflation rate of between 16 per cent and 18 per cent and meet their responsibilities in accepting full indexation? To people connected with the trade unions who believe that it is good to hand out additional massive doses of protection, I say that nothing will save their jobs if the inflation rate, coming as a result of devaluation, is not reined in. In selected areas of industry, of course, there were problems of adequate protection. If the Government had had any brains at all this situation would have been recognised months ago. Nine days ago we had devaluation. Today we have selective tariff cuts. Some time in the future we will have the White Paper on manufacturing industry. If this is the sort of Government process, thought up by the Government to build business confidence, I will have to say that business is easily pleased.

In this exercise it is not only the general tariff rate which comes up for discussion. In some industry fields there are quotas and restrictions which apply over roughly 25 per cent of our manufacturing industry. It is inconsistent to say, as the Minister said in his statement:

As from tomorrow, 8 December 1976, quantitative restrictions on completely built up passenger motor vehicles and tariff quotas on completely knocked down passenger motor vehicles will be removed.

Then two paragraphs later he said: the Government reaffirms its policy that about 80 per cent of the domestic markets will be preserved for the local industry.

I wonder how long this decision of the Government will last, in view of the decisions that have been taken by Nissan and Toyata motor companies to become involved in manufacturing in Australia. The second paragaph on page 98 of the Industries Assistance Commission report on passenger motor vehicles says:

The evidence available indicates very high levels of cost disadvantage against Japan and lower levels of disadvantage against the USA and Europe. Cost disadvantages against vehicles produced in Japan, excluding freight to Australia, ranged from about 70 per cent to over 100 per cent on small light cars, between 80 and 85 per cent on large light cars, and approximately 45 per cent on medium cars.

It is obvious from that statement and from the work of the IAC that this is another Government decision that will have to be reversed in 9 days' time because I do not know how the Government is going to maintain 80 per cent of the local market for local manufacturers and lift the restrictions on the quotas if Nissan and Toyata can effectively stay off-shore and more than compete with the local manufacturing industry without those quotas and restrictions. The first people who will be found on the Government's doorstep tomorrow will be the industry leaders, the trade unions and Premiers of those States that have those massive industries. They will be telling the Government that this is another decision that has to be reversed. Clearly it is one that has not been thought out by the Government.

I turn now to monochrome television. Will someone from the other side please tell me how this decision will affect the local industry? In cost saving terms, the decision on monochrome television is in keeping with the Government's recent economic decisions- it is absolutely laughable. Footwear, clothing, textiles and domestic appliances, unaffected by tariff reductions, will add enormously to the cost of living in Australia. Unless people anticipated devaluation- that would not have been difficult- those goods already on the water will cost consumers dearly. Let me repeat that a 35 per cent tariff applying before devaluation now becomes effectively approximately 65 per cent. Some of the industries which I have mentioned are in that category.

I want to refer also to the remarks of the Minister because they are interesting inasmuch as some other policies are concerned. I was very pleased to hear so many honourable members opposite saying 'hear, hear' when the Minister announced that the Government would be quick to act on those firms who used the advantages of devaluation to add to any wage settlements other than wage indexation. I wonder whether we are going to see another indexation or wage packet coming from this Government. Let us look at some of the things that have been said. If it had not been said here tonight one would only have had to follow the Government's recent announcement to realise that the following words should be written into anything the Government has said:

The Government has taken these concessionary measures as part of its economic package in order to modify possible cost increases and emphasises that the reduced rates are provisional.

Then follows the big question mark hanging over all the industries, all of our trading partners and all the people who are involved:

The rates may be confirmed or adjusted in the light of future circumstances.

The Minister told us in his statement that 900 items out of a total of 2750 are affected, and that imports of goods covered by these proposals total about $ 1,800m. That is just a little less than 25 per cent of our total imports. Let us do some quick arithmetic on what this will cost the consumer. The Government should realise that once the increased cost of the other 78 per cent of our imports is channelled into the cost of living in Australia the Government will be facing not only a massive increase in inflation in 1977 but also, unless it accepts wage indexation, major industrial upheaval.

In conclusion I draw the attention of honourable members to that part of the Minister's statement which said:

I should make it very clear that the Government would be extremely concerned if any sections of manufacturing industry were to apply the benefits of devaluation towards wage settlements outside indexation principles.

I would like some honourable members opposite who have some influence- there do not appear to be any sitting there tonight- to tell me whether the Government will abide by indexation, because in an earlier part of the Minister's statement he said that one of the things which the Government has done is to carry out this review on the basis of a pre-election promise. It also had a pre-election promise to abide by wage indexation. If the Government is going to thrust all these additional cost burdens on the consumers of Australia and is then going to go to the wage fixing tribunal and say 'we will not abide by indexation' it is obviously heading for industrial upheaval which it will not be able to handle. I am pleased to see in this statement that the Government is saying that as long as the wage settlements are on the basis of indexation it will accept them. We should remember that the prediction for the December quarter is for an increase in the vicinity of 5 per cent. So we expect the Government of Australia to go to the wage fixing commission and say: 'We support wage indexation. We do not want additional advantages ' -


Mr Howard - You do not understand the principle.


Mr YOUNG -The Minister says that I do not understand the principle. This Government has had a principle every 12 months to suit its own terms of reference. The fact is that the credibility of the Government has been completely destroyed. No one believes it. The poor Minister for Post and Telecommunications (Mr Eric Robinson) had to front up on a television program last night, and no one believed him, because the credibility of the Government has been completely destroyed. We see it here again. The Government says that it will not allow devaluation advantages to add to any spiral of wages. The Opposition supports indexation. We are asking the Government to do the same. Then the

Government says, almost laughingly, that if other action has to be taken on prices it will refer it to the Prices Justification Tribunal. The Prices Justification Tribunal exists in name only, and the Government knows that as well as I do. That was another one of its pre-election promises- to abandon the concept of the Prices Justification Tribunal. So that reference to the Prices Justification Tribunal does not in any way submerge the massive incompetence of this Government in economic management, particularly over the past fortnight.

Time and again it has been exposed, not just by this side of the House but by many of its own side. As one honourable senator on the Government side said today: 'If Labor had the majority in the Senate it ought to throw the Government out'. This has been a case of massive mismanagement. Here again the Government is telling the motor vehicle industry in particular, the one large industry affected by the statement, that it will not be able to continue -

Mr DEPUTY SPEAKER (Mr Lucock)Order!The honourable member's time has expired.

Debate (on motion by Mr Giles) adjourned.







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