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Wednesday, 1 April 1987
Page: 1860

Dr HARRY EDWARDS(12.34) —The honourable member for Cowan (Ms Jakobsen) has just used the phrase `the wild and boundless tax promises of the Opposition'. I will come back to that. But before I do I would refer to the difficult and quite frightening situation Australia is in today which the honourable member made no reference to or showed any consciousness of, a situation which is largely the result of the Hawke Government's policies. And I would look at the policy measures necessary to get Australia back on the path to economic balance and recovery and to achieve a reversal of the decline in the living standards of recent times. I recognise there are no quick fix, no easy, no overnight solutions. The adjustment process now facing the Australian economy is enormous. I use that word quite deliberately. It is going to be a very long haul and even more protracted than it need be if this Government does not face up now to the really tough, the really heavy, policy processes that are absolutely essential.

The obvious starting point is the continuing massive deficit situation in the balance of payments and the relentlessly increasing overseas debt which, as everybody knows, exceeded $100 billion at end September last. One may then focus the predicament of this country this way: It will need quite a measure of plain good luck, as well as the most stringent wage restraint and very tough Budgets, that is fiscal policy, just to stabilise-not to reduce, not to cut back but just to stabilise-Australia's presently relentlessly increasing foreign debt at about 40 per cent of gross domestic product within five years. That is what confronts us. They are not just my words; that is perhaps the most optimistic scenario in a study of this problem-I refer to paper No. 22 `External Balance and Economic Growth'-by the eminent body, the Economic Planning Advisory Council.

When one looks at the dimensions of the present economic mess-the balance of payments deficit not fundamentally changed and relentless debt increase, to which I have referred; the devalued Australian dollar, which is very vulnerable to change in the fragile international fiscal balance and to any prospect of global recession; inflation at 10 per cent and as likely to increase as decrease, the Organisation for Economic Co-operation and Development notwithstanding; wages, measured in actual wages, increasing at a rate in excess of 8 per cent; interest rates still 7 to 10 percentage points above the rest of the world, and if I had the time I would read out the tabulation in the most recent issue of the journal the Economist of 21 to 27 March; business profits lower in the half year to end December last than in the corres- ponding period for 1985, and they are the latest figures; the investment outlook for 1987-88, one of significant decline, in excess of 12 per cent in real terms; and the desperate plight of the rural sector, to mention the main factors-one can only marvel at the complacency, the sense of extreme gradualism and the persistent failure of the Prime Minister (Mr Hawke) and the Treasurer (Mr Keating) to tell it as it is, a failure reminiscent of their behaviour prior to the `banana republic' outburst last May which was followed in June by the Prime Minister's truthful account of the situation as one of `a situation akin to war', as surely it is.

The brutal facts are that the dimensions of the mess and the enormity of the adjustments necessary call for two main policy thrusts. The first is a degree of income and wage restraint of an order of severity quite beyond, I believe, anything this Government or its Australian Council of Trade Union backers might, indeed could, contemplate as reasonable or feasible. We have witnessed the Minister for Employment and Industrial Relations (Mr Willis) prattling away about the `good' wage outcome the Government has achieved-at a much too high 8 per cent. An outcome of the order of, say, half that or what is really desirable, a wage-salary freeze, is of course ruled out by the unions. The leader in the Age newspaper put it only yesterday:

. . . the unions appoint themselves the final arbiters of the decision . . .

Witness the meetings this week to consider the national wage case decisions. Not only that, but it also states:

. . . some are already formulating claims in defiance of it, as if it did not exist.

The leader went on:

This imbalance of power says a great deal about what is the matter with Australia's wage-fixing and industrial relations systems.

Indeed, it does. But this Hawke Government will not do anything significant to change it and that is a primary task for the Howard Government when it attains office after the next election.

The dimensions I referred to of the economic crisis and the enormity of the adjustments necessary call, secondly, for a commitment to fiscal discipline and budgetary restraint-in plain language, taking the axe to government spending and borrowing-beyond anything which I am convinced has even crossed the mind of this Government, this Prime Minister and this Treasurer.

There is to be a May statement. The purpose of the May statement is to initiate the fiscal process of reducing government spending. Doing this in May rather than in August can yield a full year of expenditure saving from the decisions taken. What is the nature of the setting; what are the dimensions of the problem the Government seeks to address? We are not told. We are not given any account at all of what the Government is setting out to achieve, of what in any quantitative sense is the fiscal task the Government seeks to address.

The Treasurer never ceases to accuse the Opposition of having `no fiscal policy' and of `a credibility gap' of the order of $16 billion, or is it now $18 billion? It does not matter. It is absurdly false and misleading. I will come back to that. The truth is that the boot is on the other foot. It is the Treasurer who has the credibility gap. It is this Government and the Treasurer in particular that have no fiscal policy, no quantified forward view of the fiscal, budgetary requirements to achieve the massive readjustment of the Australian economy that has to be effected. The Treasurer has spoken in general terms, and then only in passing, of the need-I will quote from one of his answers to a question-`to rebalance our external accounts by producing more, importing less, and producing more for export' and of the essential requirement `to lift investment', and thence of the necessity to reduce public sector demands on resources to accommodate this. What is the order of magnitude involved? This Treasurer says not a word.

Without entering into lengthy argument, I would say that what is involved is three to four percentage points of GDP in respect of restoring external balance and a minimum of two to three percentage points in respect of additional investment. I stress that the latter is necessary to achieve the former, to achieve the turnaround in the balance of payments. That indicates a redeployment of resources-not necessarily all from the public sector; one should look, in part, to additional saving, that is, a reduced proportion of private consumption expenditure-of the order of, in current terms, $13 billion to $18 billion. Expressed as a cut in one fell swoop of current Federal Government spending at $75 billion, that would represent a cut in the order of 20 per cent. Is that what the Treasurer is looking at, the order of the problem he is addressing? Probably not, as that is the order of cut advocated by the radical right-it actually advocates 25 per cent.

The Treasurer ought to come clean. He mutters something in general terms, which I have quoted, but does not spell out the implications, if he has thought them through, which sometimes I doubt. That is where the credibility gap lies. Why does the Labor Party-the Government-not tell the Parliament and the people just what are the parameters of its fiscal policy if it has in fact thought it through?

Recognising the gravity of the nation's situation and the enormity of the adjustment task-from which there is no escaping; this Government, this Prime Minister and the Treasurer persist in not telling it as it is-one might suggest a minimum requirement target, of fiscal policy and axing of government spending given effect over a period of years, not in one fell swoop, of the order, in current terms, of $10 billion. I draw the House's attention to the amendment the shadow Treasurer, the honourable member for Mackellar (Mr Carlton), has put down in relation to the second reading of this Appropriation Bill (No. 3). He calls for the Government to make significant and genuine expenditure cuts of the order of $4 billion in the May statement as a first step to restoring balance in its policies.

Debate interrupted.

Mr DEPUTY SPEAKER (Mr Cowan) —It being 12.45 p.m., the debate is interrupted. In accordance with sessional order 101a, the debate may be resumed at a later hour. The honourable member may continue his speech when the debate is resumed.

Sitting suspended from 12.45 to 2 p.m.