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Thursday, 6 October 1983
Page: 1512

Mr MILTON(10.13) —Under the previous Liberal-National Government the Australian economy was undergoing its worst recession in 50 years, with over 1.5 million Australians, including 800,000 hidden unemployed, out of work. Pensions had fallen from 25 per cent of average weekly earnings under the Whitlam Australian Labor Party Government to 22 per cent under the Fraser Government. Since the last Federal Labor Budget in 1975 education funding had fallen by 5 per cent in real terms and had dropped from 8.7 per cent to 8.1 per cent of total Budget outlays. In the area of health the Fraser Government excelled itself in providing Australia with a series of complicated health schemes which caused increasing insecurity for those sick people who could not afford to cover themselves for health insurance. It was the same story in the areas of transport , housing, children's services, Aboriginal services and services for the disabled.

However, for the Fraser Government, savage cuts in government services in all these areas of need were not enough. The taxation system was used also as a means of redistributing the wealth of the country from the pockets of the poor to the coffers of the rich, with the bottom 10 per cent of wage earners paying 19 per cent of their income in tax and the top one per cent paying 9 per cent less. On top of all this was a deliberate undermining of the centralised wage fixing system. Wage indexation was abandoned, and market forces and industrial conflict determined the wage levels of Australian workers. These disastrous economic policies, so enthusiastically championed by honourable members on the other side, and none more that the former Treasurer, the honourable member for Bennelong (Mr Howard), were based on a false and misleading picture of the effect of world economic forces on the Australian economy, as indicated by his constant catchcry that wage rises were the cause of inflation in Australia.

This claim is worthy of examination in order to expose the gross falsity of the argument. The true cause of inflation began in the United States of America in the 1950s and the 1960s with huge United States Budget deficits spreading their dollar influence throughout the world. First, after World War II, came the Marshall Plan involving large dollar credit flows to the defeated, destroyed and impoverished combatant countries. The Marshall Plan was followed by loans from the International Monetary Fund and the World Bank and its affiliates. In addition the large business corporations extended their manufacturing operations into low wage, Third World countries, aided by the merchant banks with huge credit operations. With the United States running consecutive and mounting budgetary deficits out of all proportion to its export income and foreign reserves, the United States monetary authorities were responsible for one of the worst inflations in world history.

The rise in oil prices was not, as has often been asserted, the cause of inflation, as members of the Organisation of Petroleum Exporting Countries raised their prices solely to protect their export incomes. In real terms the price of crude oil remained at 1950 levels. By placing more paper dollars in world speculation the United States monetary authorities increased liquidity and the value of the United States dollar depreciated; and, with it, the value of dollar reserves held by other countries, including Australia, were also depreciated.

Inflation was not the result of the OPEC increase in oil prices, nor was it caused by wage rises and welfare payments in Australia. The blame for Australia' s inflation can be placed fairly and squarely on the irresponsible financial policies of the United States Government because America's productive capacity did not match its huge exports of capital during the 1950s and the 1960s. Thus wage rises are not the cause of inflation. Other cost items are the cause, such as interest rates, overseas freight charges, rent rises, land values and the price of raw materials. It is noteworthy that in the period from 1970 to 1983 the share of Australian workers' wages as part of the gross domestic product actually declined, which again is another indication of the falsity of the claim that wage rises cause inflation. Since 1975-76 real labour costs have grown by 11 per cent and productivity by 12 per cent as the 1982-83 Budget Papers make clear.

It is ludicrous for Liberal-National Party Opposition members to blame the present Government for the calamitous state of the economy, when one bears in mind the decades of neglect under successive Liberal-National Party coalition governments. For the period the Liberal-National Party was in government it made no attempt to make our economy more independent of volatile international primary commodity markets and less dependent on foreign investment capital for our economic development. In fact Australia has become even more dependent on foreign investment over the years. We have adopted a virtual semi-colonial role both economically and politically.