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Monday, 25 March 1985
Page: 749

Senator HAMER(8.47) —I should like to congratulate the two honourable senators who tonight have completed their maiden speeches, Senator Knowles of the Liberal Party and Senator Black of the Australian Labor Party. I am sure that having cleared this first hurdle so well they will both make a notable contribution to our deliberations.

Tonight we are debating the Governor-General's Speech. Every word of it, of course, was prepared by the present Labor Government. It is a very odd speech. A new speech writer is obviously called for. It is rather like boarding school blancmange, difficult to get a grip on and leaving a queasy aftertaste. Even where there are sensible remarks in the Speech, they are destroyed by nonsensical remarks elsewhere. As an outline of the Government's approach to dealing with the inevitable difficulties that will confront us in the coming three years the Speech is, to use the favourite expression of the Prime Minister (Mr Hawke), pathetic. The problem is that the Speech does not seem to bear any relation to the world we live in.

Let us look at this statement: 'The Government intends to maintain the approach to economic policy which has been so successful in its first term of office'. God help us all! This statement is made at a time when the value of the Australian dollar has almost been in free-fall. That event is completely ignored by the Government, yet by the value of our dollar the rest of the world judges our economic performance. Four years ago the Australian dollar was worth $US1.15. At the end of last year it had dropped to $US0.85, this year it plummeted to an all-time low of $US0.65. What is the reason for this fall? It is a reflection of our trading performance. A free-floating dollar is a self-correcting mechanism to balance any trade deficit. With our deficit on current account under this Government now running at $11 billion a year, a fall in the dollar was inevitable. Of course, the sudden fall in the dollar was affected by other factors too, and it is possible that the dollar is now undervalued. It may have been affected by speculation. It was undoubtedly affected by the vacillating performance of the Government in regard to money supply and foreign policy-the MX issue, ANZUS, Vietnam and so on. Overseas investors are not very impressed with the prospects of our economy under this Government. So much for the Government maintaining the approach to economic policy which has been so successful in its first term of office'. The rest of the world does not see any such success. The Government is seen as 'wimpy', too wimpy to take any hard decisions in the coming three years.

With our mammoth current account deficit, failure to control the money supply is like throwing petrol on a fire. Our money supply has been expending at an alarming rate. Over the seven months to January this year, trading bank deposits increased at a seasonally adjusted annual rate of 18.4 per cent; that is, far above the original Budget target of 8 to 10 per cent. Trading bank lending is increasing even faster than deposits. In the face of this, the gay abandonment by the Treasurer (Mr Keating) of any monetary target was just an invitation to people to speculate against the dollar. It is urgent that we re-establish a responsible monetary policy. Where is that mentioned in the Governor-General's speech? Yes, that is right; it does not rate a mention.

The assessment by the rest of the world of our economic performance as appalling means that we must make every effort to get our act together. It is a challenge which must be faced and this needs leadership. The smug, self-satisfied and turgid statement which the Prime Minister (Mr Hawke) gave the Governor-General to read gives no leadership and no direction. It can be done. Consider what happened in Sweden. Sweden was heavily hit by the 1979 oil price explosion. The Swedes did not sit around congratulating themselves for the good times in the past. They acted. They embarked on a policy which I recommended to this Government. They reduced demand by a sharp reduction in the Budget deficit. At the same time they held down wages. Real wages fell, with community support. The consequence was massive switch from income to profits, particularly profits in the international trading sector. The reward was low inflation and a low level of unemployment of about 3 per cent, compared to an average of about 10 per cent in the Western European countries. It can be done, but the Government must give leadership.

Leadership could not be further from the performance and intentions of this lowest common denominator Government. We are a country with great assets, compared to almost any country in the world. We have enormous mineral resources, we have a continent to ourselves. We have no immediate military threat. We have a homogeneous and well educated population. Perhaps most important of all, we have a stable political system in which all the principle political parties agree on the essential ground rules. Yet we are not doing nearly as well as countries with much greater problems to overcome. It may be an economic version of Toynbee's Challenge and Response; I do not know.

For 40 years, from 1865 to 1905, we were, per capita, the richest country on earth. At the turn of the century we were rivalled only by Argentina. We all know what happened to that country. At the start of World War I we were still 10 per cent richer than the United States, which has long since passed us by. As late as 20 years ago, we were still ninth on the international table in terms of per capita wealth. In 1970, we were overtaken by Holland; in 1975, by France; in 1980, by Iceland and Finland; in 1984, by Japan. We now rank fourteenth in the world table-fourteenth and still dropping. No nation can continue to run current account deficits of $11 billion a year, as this Government does.

For years we have been living beyond our means, borrowing overseas to pay for our current standard of living. That is bad business in anyone's terms. We are heading towards our bicentenary to celebrate our stewardship of this rich continent over the last two centuries. All we have to show for this stewardship is our inability to pay our way in the world. How have we got into such a mess when even a country like Singapore, with no resources except the hard work of its people, seems likely to be richer than we are within a few years? With only slight exaggeration, it has been said that we are heading towards Third World status, the only difference being that we will be able to drink the water here.

There are many causes of our relative economic decline. I will enumerate them all in a moment. Anyone looking coolly at Australia from the outside would have to see that our fundamental problem is our system of wage fixing and industrial relations. Our system is unique. For more than 80 years, despite repeated tinkering, it has proved a disaster which has harmed all Australians. It was well intentioned, an interesting experiment if you like; but it has not worked. Consider what has happened under the conciliation and arbitration system. A suitable union system has not evolved. We are plagued with demarcation disputes, the most intractable of all industrial problems. Consider the recent dispute between two unions over who should provide an unnecessary crew member for New South Wales trains. That dispute cost millions of dollars in coal exports and was yet another blow to our reputation as a reliable supplier. One can give almost endless examples of this type of crazy and terribly damaging strike. The conciliation and arbitration system has not stopped strikes. The procedure all too often is strike first and, if the union does not like the arbitration decision, strike again.

Our wage fixing system is absurd. The so-called comparative wage justice does enormous harm to many businesses which simply cannot afford to pay the increases which flow on to them from more prosperous areas of the economy. So they go broke and their workers go on the dole. The Australian Council of Trade Unions has the impertinence to call that wage justice. The balance between profits and wages is seriously distorted, with the result that the levels of research and development, and investment in new plant and equipment, are much lower than they should be and must be if we are to compete with the rest of the world-and compete we must.

The power balance between employers and unions is totally out of line. Awards are enforceable on employers; unions defy them at their will. An elaborate structure of minimum wages, penalty rates and other labour restrictions has been built up. This structure seriously curtails growth in employment in the service industries, where the growth in new jobs must come, and are a cruel fraud on the unemployed. Perhaps worst of all, the system has encouraged a confrontational legalistic approach between employers and unions-them and us-rather than employers feeling involved in the success of their enterprise, as American or Japanese workers usually do.

This terrible catalogue of defects stems directly from the uniquely Australian system we adopted 80 years ago. How much longer must we go on before we realise that we have one of the worst industrial relations systems in the world, one that is harming all of us, and that a much better system is possible? We do not have to be stuck with a proven failure. Yet what is the Government doing? It says:

The Government maintains its commitment to the policies in the Accord and will give particular emphasis to the maintenance of an effective wage fixing system to protect real living standards whilst ensuring moderation in labour cost increases.

That sounds fine, but it does not begin to tackle our deep seated problems. The Government is now supporting a 2.7 per cent increase in everyone's pay. Firms will have to pay up whether they can afford to or not. There is even talk by the ACTU-and the Government jumps when the ACTU whip cracks-of a further productivity bonus to all workers later in the year.

Senator MacGibbon —A what?

Senator HAMER —A wage rise based on a slight improvement in productivity. We desperately need increased productivity to improve our international competitiveness, but if every time we improve productivity we whack up the costs of employing labour and thus lose the advantage we have just gained, we will continue to spiral downwards in the international table of living standards.

What must we do? What is the answer to these problems? We will certainly not find any answers or solutions in the Governor-General's Speech. First we must bring the unions back under the rule of law. We have stringent laws and regulations-too many really-which are strictly applied to the business world, such as the Companies Act and the Trade Practices Act, but no such stringency is laid upon unions. Instead, we have the extraordinary situation of unions being able to defy the law, and this is condoned by this Government. The former Attorney-General set up the National Crime Authority but strictly forbade it to investigate serious crimes committed by unions in the pursuit of industrial action. The attempt by the Government to repeal section 45D of the Trade Practices Act was another attempt to legalise secondary boycotts and put the trade unions beyond the effective reach of the law.

Why are trade unions exempt from the provisions of the Trade Practices Act, so that they are permitted to breach the Act? This is an iniquitous exemption and very damaging to the interests of the community. It is vital to everyone's interests that trade unions be brought under the law. It is as important as it was to do the same to employers a century ago.

Secondly, when we have the unions securely under the rule of law, we must decentralise the whole industrial relations system. We must have enforceable labour contracts between employers and employees away from the centralised conciliation and arbitration system, which simply has not worked.

It is absurd to say that any of this is difficult. Other countries are doing it and they seem to find nothing impossible in enforceable contracts and decentralised mutual agreements between employers and employees. We must stop this nonsense of crying 'too hard'. If we fail to do it we will inevitably sink to Third World standards, as has Argentina, and it will be our own fault and the consequence of lack of leadership by the Government.

The third thing we must do is face up to the necessity of a complete and fundamental restructuring of the whole system of wage fixing. It must be flexible and it must be realistic. This Parliament can give the lead in this matter and it must. However, it must be argued that if the Commonwealth frees up the labour market it will be sabotaged by some of the States. We must on no account allow the States to reinstitutionalise what we free up. We probably have power, under the corporations section of the Constitution, to prevent the States from doing that. If this head of power fails, there is another one. I do not like the use of the external affairs power to extend Federal control into areas better left to the States, but I would be prepared to see it used to prevent maverick States from destroying a vital economic reform. Since Australia is a signatory to the International Labour Organisation conventions and has ratified some of the relevant ones concerned with wage fixing, we must recognise that we do have the necessary power to prevent the States from setting up organisations which would destroy a free labour market.

Economically essential though decentralisation of wage fixing is, it will not necessarily result in full employment. We used to be a leader in social experiments, though some of them such as the conciliation and arbitration system, did not work; we used to be an innovator. We must not be hog-tied by systems which were fought for and won in the 1890s or whenever. We must be prepared to look at new approaches which would result in full employment and would involve workers in the success of their work place. We keep talking about wage fixing, just as we have done for the last 80 years. Perhaps we should begin to talk about an entirely different concept-revenue sharing. How would it work? Let us say that under wage fixing a firm pays its workers $24 an hour in wages, including on-costs. If the firm wants to take on an extra worker, the net revenue earned by the extra output of the new worker must exceed $24 an hour, otherwise the worker would not be taken on. With revenue sharing, a firm could agree to pay its workers a fixed share of its net revenue, say, two-thirds. If the total net revenue per worker is $36 an hour, each worker would still continue to receive the same $24 an hour. This sort of labour market virtually guarantees full employment through work sharing because revenue sharing ensures that it will always cost a firm less to employ an extra worker than it gets back in extra revenue. So firms will continue to recruit workers until nobody who wants to work is left to recruit. In addition, there will be every incentive to increase output per worker, because the revenue per worker will increase and the worker's share of the revenue will be worth more.

Because revenue sharing contracts alter the way that firms decide how many people to employ, they also change the way communities react to economic shocks. If, for example, General Motors-Holden's Ltd suffered a sudden drop in demand for its cars, its response at present would be to cut output and shed workers. Most of them would go on the dole. Under a revenue sharing contract, GMH would be much more likely to hang on to its existing workforce. In the long run, if the drop in demand persisted, workers would still have to go. But under a revenue sharing agreement they would go voluntarily, because they would find that their pay at GMH had fallen below what they could get elsewhere and they would not have been unemployed in the meantime. This is a radical approach but it is the sort of thing we must look at if we want to have a growing economy and full employment.

Of course, wage rates and wage fixing, although the most important, are not the only problems which affect the Australian economy and which have caused our fall in affluence relative to that of other countries. One is beyond our control-our terms of trade. The value of our major exports-wool, wheat, meat, coal, iron ore and sugar-has declined relative to the costs of manufactured goods. In other words, what we get from our exports has fallen in relation to what we have to pay for our imports. There is nothing that we can do about that at the moment, but there are other problems which we can do something about, and indeed we must in order to prevent our further economic decline.

I congratulate the Government on what it has done to deregulate our financial system, following up the pioneer work done by Mr Howard and the Fraser Government. This freeing of the financial system is fundamental to our economic progress. However it does have one short term problem for the Government. It shackles it to reality, which is an unusual position for this Government, but this link with financial reality is essential, if we are to prosper. There is another problem area about which this Government-and previous governments-talked from time to time, but took no action, and that is trade barriers-quotas and tariffs. We must tackle this problem and we must reduce these barriers. In the long run this is the only sensible option. There will be no leap up in the level of real income in Australia unless we concentrate on reducing the protection on things we do badly. There will be consequences if we lower these barriers and encourage increased imports. Some industries will grow and others will wither away. But this is happening anyway and the consequence of doing nothing about trade barriers will be much worse-high inflation and low growth.

Of course, I do not advocate any sudden or abrupt changes to our tariff policies. We all learned that lesson after Mr Whitlam's clumsy across the board 25 per cent tariff cut. There would have to be exceptions. We would have to exempt defence industries which may be uneconomical in peace time. We might have to protect for a limited time new industries of economic importance and we must protect our industries against dumping and other unfair trade practices.

If we phase in on a predictable basis a reduction of trade barriers to, say, half their present level, first, there will be a rise in real incomes in Australia and, secondly, there will be a diversion of our scarce resources of capital and skilled labour to the most productive areas of the economy. Put simply, we would have a healthier and a more efficient economy. The Prime Minister was a member of a committee that said: 'Yes, we must reduce protection, but no, not until unemployment is below 5 per cent'. This is like a doctor refusing to prescribe treatment until a patient has recovered.

While I am talking about things we do badly, I want to stress that governments must get out of businesses which they do not do well. We must privatise as many government businesses as we can, particularly those which are central to our economic efficiency. One of the businesses which the Government obviously does not run well is Australia Post. Not only does the mail not get through-unlike the old days of ponies and mail coaches which defied all weathers and all dangers to get the mail through on time; unlike the old days of the postie who delivered household mail twice every weekday and once on Saturday; unlike the old days when a letter from Melbourne to Sydney cost twopence and arrived within one or two days-but also despite better conditions, higher wages and new technology, now we have deliveries once a day on weekdays only, mail is now very expensive and totally unreliable, unless we pay exorbitant priority paid rates, which means that a letter from Melbourne to Sydney now costs $1.13. The growth in private courier services is a clear indication that the Government-run postal services are not meeting the needs of the community. There is a good case for privatising those sections of Australia Post which do not have a natural monopoly. The same should be said of Telecom, of the Australian National Line, of Trans Australia Airlines-the list goes on and on.

Why are governments so bad at running businesses? It comes down, really, to two things: The system stifles entrepreneurial flair, and because the organisation cannot go bankrupt there is no normal limit to the demands of labour or the weakness of management. I repeat, we must get the Government out of as many business activities as possible, in the interests of the efficiency of the Australian economy as a whole.

Finally, we must do something about education, for the future prosperity of a nation is directly related to the efficiency of its education system. We are in the terrible position of having a Minister for Education who has said publicly that she does not believe in the pursuit of excellence in education; presumably she believes in the pursuit of mediocrity. We seem to be totally dependent for new ideas on the Americans, but we follow them 10 years late, so that just when America is abandoning an unsuccessful new idea, we are adopting it.

The retention rates of students in secondary schools in Australia are almost the lowest in the Western world. It is notable that the retention rates are much lower in government secondary schools than they are in Catholic secondary schools, although there is no evidence of any significant difference in the socio-economic standards of the two groups. I am all for freedom of choice, but I am appalled that people have to opt out of the government system because their children will not get a proper education there. I believe that the greatest problem in government schools is caused by a lack of discipline and a lack of quality and authority in school principles. These two factors are directly linked. Government school principals are generally of a markedly lower standard than independent school principals. If we want to improve government schools we must allow parents to choose which government schools they send their children to and to vote with their feet if they are not satisfied. We must give principals of governments schools the right to hire and fire their teachers. Of course, this is primarily a matter for the State governments, but we must set the example in our area of responsibility, the Australian Capital Territory.

All these areas of essential reform are difficult-deregulation of the labour market, reduction of protection, privatising government businesses and improving our government schools. They are all very difficult and would all offend sectional interest, which is why they have not been seriously tackled in the past. But we have desperate economic problems ahead and we must face up to what we have to do to maintain and improve our quality of life.

What sort of vision of the future does our present Government have-if vision is the right word for its myopic squint? It has not grasped the fundamental truth that it must create wealth before it can distribute it. It seems to envisage a society in which the education system will achieve equal outcomes, with the brightest being held down to the level of the dumbest; where there are no rewards for enterprise or initiative; where the direction of our businesses is determined by the trade unions; where no one works harder than anyone else, so the pace is that of the slowest; where no one does any community service for love or desire to serve the community-no volunteers must be ridiculed and the services professionalised, which means that the services are much more expensive and much less effective. A brave new world indeed, yet this is the path the present Government is leading us down. It is up to the Opposition to point out the economic perils ahead, and to produce a coherent program to tackle the problems I have mentioned. And that we will do, for if we face up to our problems and tackle them boldly we can restore this very well-endowed and fortunate country to its proper position as the wealthiest, freest and most tolerant society in the world. But it will take a change of government to do that.