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Thursday, 20 November 1986
Page: 2602


Senator CHANEY —I refer the Minister for Industry, Technology and Commerce to comments yesterday by Dr Peter Brain, Director of the National Institute of Economic Industry Research, which cast doubt on the extent of benefits to Australian manufacturing of the currency depreciation. Dr Brain is reported as saying that while the weighted value of devaluation has been about 30 per cent over two years, this benefit has been offset by between 33 and 45 per cent because of higher import costs. Does the Minister agree that Dr Brain's assessment is in line with the recently released Bureau of Industry Economics study on the effects of the 1985 devaluation which found that, in general, cost increases for manufacturers have been of the same order as export price increases? Given that this week's National Australia Bank Ltd survey also highlighted the effect of cost increases on profitability, what action does the Government propose to reduce domestic costs? In addition, does the Minister agree that everything points to the fact that the economy simply cannot afford an across the board rise to flow from the current national wage case?


Senator BUTTON —I might start at the last part of the question first and say that the Government will be putting its position to the national wage case bench. It has been foreshadowed in general terms what the Government will be putting. The question of the extent of across the board increases in wages is of crucial importance in the context of this case. I have not had time to study the views of Dr Peter Brain on the particular matters that were reported yesterday. I will do that as quickly as possible. But I am not sure that it is correct to relate the 1986 views of Dr Peter Brain and the 1986 views of the Bureau of Industry Economics to the findings of the Bureau of Industry Economics survey on the effects of the first major devaluation which occurred in 1985. If Senator Chaney is seeking by this question to make a general point that governments and Australian institutions generally have to be very rigorous about cost increases, I agree with that. At this stage I am not in a position to answer the particular parts of the question regarding the Brain survey.


Senator CHANEY —Mr President, I ask a supplementary question. Can the Minister address himself to that part of the question where I asked what action the Government proposes to reduce domestic costs, which I would suggest to the Minister is an important matter, given that these surveys indicate a very limited value to industry from devaluation and the urgent need that we have for increased activity in manufacturing?


Senator BUTTON —I might just come back to the surveys. I think it is very difficult to generalise on the basis of this material from industry to industry. It is quite clear that the devaluation has had very markedly differential effects in terms of costs. Secondly, in relation to the point that Senator Chaney made about wages, let me just make the point that in most industries now wage costs constitute about 15 per cent of total costs. In the high technology industries they constitute about 8 per cent of the total costs. In the more labour intensive areas of the clothing industry they constitute about 25 per cent of total costs. Australia has a very significant management problem, which other countries have addressed much more rigorously than we have. It must reduce the proportion of total costs in industry which are outside the wages field and which relate to a whole range of issues of management and so on. I am not sure that governments can do other than encourage in respect of those areas of costs. I have already said that the extent of wage increases is a matter of legitimate debate and the Government will be putting a view which, as emerges from today's Press, diverges from the view put by the Australian Council of Trade Unions and others on the appropriate level of wage increases.