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Wednesday, 18 February 1987
Page: 185

Senator LEWIS(4.31) —The Senate is debating a motion moved by Senator Chaney in the following terms:

That, in the opinion of the Senate, the following is a matter of urgency:

The urgent need for a mini-budget to reverse the disastrous Hawke government policies that have produced high interest rates, huge increases in the price of essential items such as the family car, the highest tax burden in Australia's peacetime history and a crippling foreign debt.

We have heard from the Minister for Finance (Senator Walsh) in response to Senator Chaney's magnificent speech today. The only substance to Senator Walsh's remarks was his acknowledgment that under the Hawke Government the people of Australia have suffered, and will continue to suffer, a massive reduction in living standards. I acknowledge that he did admit during the course of his speech that Mr Howard had been Treasurer during one of the worst droughts in Australia's history and during a world-wide recession. Of course, that is where it all began, because since then, under the Hawke Labor Government, this country has suffered four years of wasted opportunities.

In 1982, when Mr Howard was the Treasurer of this country, Australia was in the grip of a terrible drought and the world was in the middle of a bad recession. The Fraser Government policies to overcome that were, firstly, a wage freeze and, secondly, a deficit jolt to the economy. Senator Walsh would acknowledge, in one of his rare moments of truthfulness to the Parliament, that those policies were the correct ones to bring Australia out of the problems which it then faced. In fact, the policies worked. The world recession was over, the drought broke and this Government came to office at a time when it had marvellous opportunities, thanks to the wage freeze and thanks to the deficit jolt to the economy. But what did it do with those opportunities? It absolutely wasted them.

Government back benchers will regret to their dying days that they allowed this Government to go on with this business of high spending and high borrowing. Once the world recession was over, once the drought had broken, and once this country got back on to its feet again, the Government should have got out of the expenditure system. It should have stopped spending all of that money. Senator Walsh will tell honour- able senators opposite that this is so. No doubt he has told Caucus many times that the Government should have stopped wasting the Federal revenue in the way it was doing. It kept borrowing at a time when it should not have continued to borrow, and it kept spending. Now that it is faced with a drop in world commodity prices of our exports, the situation is quite disastrous. I have no doubt that Senator Walsh predicted to Government members in their Caucus room-he would not say it in the Parliament, but no doubt he predicted it to them-that if the Government kept borrowing, this is what might happen. It has happened, and this country is now faced with a disastrous economic situation. Its policies have been exposed as unable to cope with that situation.

As I have said, Senator Walsh today admitted that this Government has no policy to cope with the situation, other than to cut living standards. Of course, that has already happened. There has been a massive cut in the living standards of Australians. We can see that that is so-and I will come to that point in a few minutes-by the sorts of prices that people are paying for their goods. But there is an alternative. We must encourage investment in this country. How can we do that? The first thing we must do is to lower interest rates. We must allow interest rates to come down to a reasonable figure. The first step in doing that is to reduce government expenditure. This motion of Senator Chaney's is all about reducing government expenditure. That is the first step in bringing interest rates back to a moderate level within this country.

If the Government does not bring down a mini-Budget, if it does not cut government expenditure, interest rates will remain extraordinarily high and the investment that should take place in this country will not take place. A mini-Budget is the first step. The Business Council of Australia called for it yesterday. We started calling for it last September. When we saw the Budget which the Government produced for this country, it became obvious within weeks of that Budget being handed down that Budget expenditure was still too high, notwithstanding the purported cuts which the Government had stated in its Budget that it would implement, and which will not occur because it will overrun its Budget deficit. That is the first step.

The second step would be to keep the level of wages growth down to that of our trading partners. Again, the Government will not do that. It will not stand up to the Australian Council of Trade Unions. It will give in to it again. The Government is talking about having a $10 wage increase. The ACTU is saying that in no way will it agree to a $10 wage increase. It must have a minimum $20 wage increase. So the accord has gone for a burton and the level of wages growth, instead of being kept down to that of our trading partners, will be allowed to continue to rise. That second step would reduce demand and inflation without choking off investment. That is what this Government is doing at present; it is absolutely choking off opportunities for business people to invest in this country. The Government should be cutting business taxes, instead of which it is raising them. It is raising the corporate tax rate to 49 per cent, and it has imposed the fringe benefits tax on business people in this country.

If the Government wants to go further, why does it not have a good look at restrictive work practices and government regulations, which mean that it takes months for people to get anything done? The transport system in this country is also helping to strangle private enterprise. If the Government stopped choking investment, investors would be prepared to have a go in this country. I remind the Minister for Industry, Technology and Commerce, Senator Button, that on 15 October last year, in response to a question I put to him about the increasing current account deficit, he made some disparaging remarks about my concern that the level of investment rates was encouraging speculative funds into this country and that it was fraught with danger. I warned him what the situation was. But no, he knew that what was happening was that there was a political move in this country to keep interest rates at a high level in order to encourage short term foreign investment in this country, to try to overcome the gap in the current account deficit. I warned Senator Button then that it was a dangerous policy. I warn him today that this country is living on a knife edge because of that dangerous policy.

I am sure that Senator Walsh would acknowledge publicly that the economy is balanced to such an extent that the Government must continue to underpin the value of the currency by tightening monetary levels and raising interest rates to a very high level to keep that short term money in the country. The Government is worried that as soon as interest rates fall-it knows that interest rates must fall-that money will rush out of Australia and the value of the dollar will fall drastically. The Government is holding the economy on a knife edge in this area, and all because of these disastrous policies and the disastrous continued spending that it has maintained since Australia recovered from the drought and since the world recovered from its recession.

Let me make some comparisons between our interest rates and interest rates in other countries. Australia is currently running a commercial prime interest rate of 18.25 per cent, whereas the rate in the United Kingdom is 7.5 per cent and in Japan it is 3.75 per cent. I told the Senate that I would look at the effect of this on the people of this country. Let us look at the interest rate that people are paying on Bankcard. The Bankcard rate is 18 per cent to 22 per cent. The rate for personal loans is 20 per cent. Car prices for comparatively modest models have increased by between 33 per cent and 85 per cent. Is it any wonder that the people of Australia are no longer buying new motor cars at the level of demand which ought to exist in this country? A Commodore SL went up by 42 per cent from May 1984 to January 1987. Even a Camira has gone up by 40 per cent. Fancy being asked to pay $13,363 for a Camira. Who would want to buy a Camira for that sort of money? Of course, car dealers are not selling them because the price is too expensive, and it is too expensive because of the Government's policies. Even if people did say that they would buy a Camira at that price, they cannot afford to pay the 20-odd per cent interest rates that would be charged on a loan for such a motor car. A Falcon utility now sells at $14,491. What on earth has the Hawke Labor Government done to this country? Then if we look at food prices we see that in four years of Labor government milk has gone up by 23 per cent, bread by 43 per cent and flour by 40 per cent. The price of tea has risen by 83 per cent and baby food by 32 per cent. That is because of inflation and rising prices under the Labor Government and thanks to its policies and the country going broke. There have been enormous increases in bankruptcies.

Senator McKiernan —Particularly in Queensland.

Senator LEWIS —Let me say that, notwithstanding some of the allegations made by Labor senators, the largest increases in the number of bankruptcies have occurred in States with Labor governments. If they want to know the figures, the highest rate is in South Australia with a figure of 61 per cent, Western Australia 57 per cent, Victoria 37 per cent and New South Wales 28 per cent. So the highest bankruptcy rates have been in the Labor States.

Let us look at the question of unemployment. My father was a Labor man, and I thought that the Australian Labor Party abandoned unemployment as an instrument of economic policy back in his era when he was a young man 50-odd years ago. I was looking at a political book the other day, written in 1972, which referred to Australia's bipartisan full employment policy. Then we had the Whitlam Government with its three disastrous years. What happened? Thanks to the policies of the Labor Government, interest rates and inflation went right through the roof, followed by massive unemployment. We tried desperately to rein it back, but were not helped by the policy of the Australian Council of Trade Unions, and certainly not by Mr Hawke who was leading the Council. One can recall what he did to us when we were in government. We tried desperately to bring down unemployment, but the situation is that this Labor Government has not just allowed unemployment to float, but is using it as an instrument of economic policy. Let me quote what Mr Howe said recently. On 5 December last year he was reported as saying:

Unemployment benefits have tended to be viewed as welfare payments but we should see it--

that is the unemployment benefits-

as a link in the labour market.

In other words, he was saying that these people are not unemployed, but that the benefit is some sort of link in the labour market-they are being paid unemployment benefit as wages by this Government. That is the way Mr Howe sees the position. Mr Willis meanwhile predicts that unemployment will remain at between 8.2 per cent and 8.4 per cent. I hope that he is right, but other people in this country are predicting that it will be up to 9.5 per cent by July this year-that is, 640,000 Australians unemployed. This Government continues to use those unemployed people as an instrument of its economic policy.

As the substance of this matter of urgency indicates, there is a desperate need for a mini-Budget so that the Government can take at least the first step in trying to bring the economy back into some semblance of sense. The mini-Budget should rapidly cut government expenditure for the remainder of this financial year and then go into the following financial year with even greater cuts in government expenditure. I sincerely support the matter of urgency proposed by my colleague Senator Chaney.