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Thursday, 2 April 1987
Page: 1729

Senator HAMER —Has the Minister for Industry, Technology and Commerce seen the Australian Bureau of Statistics figures released yesterday which show a fall in manufacturing output and in manufacturing employment, especially full time employment, during the last six months? Does the Minister agree that the long devaluation of the Australian dollar since the end of 1984 should by now be sharply stimulating growth in exports and import replacements? Does the Minister agree that our economic recovery cannot be said even to have started while the real value of investment in manufacturing is either static or declining, as it did in the last quarter for which figures are available? Does he agree that the level of investment in manufacturing plant and equipment is still much lower than the levels of investment before the present Government took office? Why is manufacturing activity still so sluggish?

Senator BUTTON —I agree with Senator Hamer's reading, in a technical sense, of the ABS figures. I agree with none of the other suggestions which he has made. It is quite inevitable that, in the economic context of last year, when the growth rate in this country went down from something in the order of 6 per cent to something in the order of one per cent to 2 per cent at best, there would be a levelling off in manufacturing production statistics. I am just surprised-happily surprised-that the production statistics were not worse than the figures to which Senator Hamer has referred.

Senator Walters —Then we would have been a banana republic.

Senator BUTTON —No, Senator, because, as I understand the characteristics of banana republics, any analysis of a banana republic's performance would reveal that figures like the ones Senator Hamer has cited for one quarter would have been applicable for many years. That is not so in this case.

Senator Walters —It is only because you haven't been here for many years.

Senator BUTTON —I do not wish to carry on a dialogue with the honourable senator at Question Time, not because I am snobbish or not capable of loquacity myself, but because I like to have intelligent conversations, and I am not likely to be honoured with one with her.

First of all, the overall aggregate employment figures for last year showed an increase in unemployment and the fact that that should be reflected in the manufacturing sector is not surprising in the slightest. Senator Hamer then asked whether the duration of the Australian devaluation should not have led to a much greater stimulus for Australian manufacturing industry. There are all sorts of figures floating about, apart from the figures to which the honourable senator referred. Investment in manufacturing industry showed relatively a strong performance in the same period. But with regard to the devaluation effects this Government has said-certainly I have said-that the so-called J-curve effect would be delayed in the Australian context because our manufacturing sector, as this Government inherited it, had been run down for years and had been totally neglected by policies which were directed to barrier protection and nothing else.

Senator Chaney —But it has got worse in terms of investment. That is the point.

Senator BUTTON —No, it has not got worse in terms of investment in the manufacturing sector. Let me continue, if I may, without continual interruption. The fact is that we inherited a manufacturing sector which had been brought up in the tradition of governments providing made-to-measure tariffs for every problem which arose in the manufacturing sector, and everything else in the manufacturing sector being neglected. It was for those very obvious reasons that the manufacturing sector would not respond solely to a change in the exchange rate and consequent effects on the price mechanism in Australia in the way in which it might have in a more sophisticated manufacturing economy like West Germany.

One can rely on the figures for the last quarter of 1986 in terms of production. If one looks at the details of the figures, one sees that some areas are up and others are down. The sector of manufacturing production which is notably down is the vehicle manufacturing sector. I do not want to debate that now, but when there is an increase in prices for motor vehicles as a result of the devaluation of the dollar at the same time as there is a rigorous regime of wage restraint-which honourable senators opposite say does not go far enough-it is completely obvious that the motor vehicle industry would be the first to be adversely and significantly affected by that, because people make decisions not to buy motor cars or to postpone the purchase of motor cars in those sorts of circumstances.

I do not remember all the sub-parts of the honourable senator's question, but I think the situation for manufacturing is very optimistic in this country. Discussions with manufacturers, as distinct from reading the ABS figures, will give one the same sort of view. Of course, the view which I just expressed is quite strongly expressed in the latest report published on Sunday of the Metal Trades Industry Association, which draws attention to the fact that it is very optimistic about this year and the future.

Senator HAMER —I ask a supplementary question. I remind the Minister of one sub-part of my question, a fairly important part, which he did not answer. Does he agree that the present level of investment in new plant and equipment in manufacturing industry in real terms is now lower than it was when the present Government took office?

Senator BUTTON —That is a different question from the one that Senator Hamer originally asked me. Of course, there was very significant investment in heavy engineering manufacturing and areas like that in 1980-81 because at that time Ministers in the previous Government were psyching up the resources boom as being the solution to Australia's problems. Enormous anticipations were aroused about the resources boom. It was to be the new Liberal Party el dorado for Australians which would take us to the year 2000.

I remember the then Deputy Prime Minister saying that the mining industry alone would employ 500,000 people. That was the figure which the then Deputy Prime Minister of Australia talked about in 1980 and 1981, when he was talking up the resources boom, as I say, as some new el dorado for Australia. It was that sort of conduct which led people to all sorts of false anticipations, which led to that investment pattern and which led to a significant percentage of the current overseas private sector debt.