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Tuesday, 30 October 1956

Mr SPEAKER - Order! The honorable member for Yarra will refrain (wm interjecting.

Mr MENZIES - What has happened since? As 'l would have 'thought even the most untutored student df economic history would know.* what "has happened is 'that the

Arbitration Court has dealt with the wage in the light of the general state of industry and its capacity to pay, and has said from first to last that it should prescribe the highest possible wage having regard to the general state of industry and of the national economy. Small wonder, in those circumstances, that the Arbitration Court said, " But how do you lie on to a wage calculated in that fashion some ideas of changing costs of living which are based upon family needs? The two things are entirely different ". And, in the case that came before it in 1953, the court said, after hearing prolonged and close argument on both sides, We will not have quarterly adjustments. These things are, in effect, out of date, having regard to the way in which the wage is now calculated. But we will look at the wage periodically and we will again decide whether it is in need of revision, and whether it may be increased, having regard to the general position of industry and the general prosperity of the country ". I venture to say that any fair-minded person who carefully considers these matters will have no doubt that that was a sensible decision, and one that was badly needed, because a spiralling operation was in progress which, I think I remember the Premier of New South Wales himself saying, tended only to react on the worker who earned the wages and had to pay the prices.

One other matter upon which the right honorable gentleman got going is one that is rather an old favourite of his, at least for political purposes. He complained about the profits made by companies. He has always seemed to me to have the most naive outlook on company profits. I should hardly have expected to hear a man of his intelligence saying to people, so that they may believe it, " Here is a company that made a profit of £850,000 ". People listen to that and say, " ls that not scandalous? A profit of £850,000 " ! What he omits to say, of course, is upon what total body of funds, and in relation to what total turnover of business, this profit was achieved. Here again he always say, " I will take the capital ".

Mr Pollard - The dividend rate was given

Mr MENZIES - Even I know thatbecause a dividend rate, if I may agree with mv distinguished friend from Lalor, is always calculated on capital, but a profit rate, if it is to be seen in proper proportion, should be calculated on the total funds al risk in the transaction. Honorable member on the other side of the House will bc hard put to it to persuade any one thai that is not essentially true. But, at any rate, the right honorable gentleman succeeds in whipping up a' certain amount of envy, and a certain amount of malice. If the Leader of the Opposition had his way, and all the companies in Australia were brought back to a profit rate, on their shareholders' funds, of 4 per cent, or 5 per cent., I wonder what would happen in Australia I wonder how many people would be better off. I wonder how many people would be employed in businesses existing in such a precarious situation. After all, we on thi> side of the House have accustomed ourselves of trying to take a comprehensive view of these matters, and, at any rate, we are sufficiently radical to have discovered that the best thing for the Australian wageearner is to be employed by a prosperous enterprise.

Opposition members interjecting,

Mr MENZIES - Oh, no, Opposition members do not want that. In their queer, obfuscated fashion, they seem to think that one can destroy the profit element in business and, at the same time, guarantee full employment, at rising wages, to every one in the country.

Mr Curtin - Rubbish!

Mr MENZIES - Of course, it is rubbish. I acknowledge that. 1 think that is the most perfect description of it that I have ever heard.

Let me turn away from those somewhat temperate comments on the speech that has fallen from the right honorable gentleman on what, I believe, is called a motion of censure, and let me say something about what underlies this argument directed against the Government.

Mr Cairns - Are you noi going to deal with it at all?

Mr MENZIES - Yes, I am. That is exactly what I was proposing to do now. The honorable member, has an excellent opportunity of remaining awake for the next half hour. As I know that he is an earnest seeker after the truth, here is his chance to find it. I ask him, therefore. what is the policy which the Leader of the Opposition oilers in substitution for the policy of the Government. That, after all, is trie crucial test. He has made it abundantly clear that he wants to raise wages. That is a good, popular policy, and, therefore, he starts off with it. He says, " 1 am going to raise wages ". Then he says that he is going to peg prices, or, at least, that he intends by some abracadabra to persuade the States to give an Evatt government in the Commonwealth sphere power to peg prices. He says, therefore, that he intends to raise wages and to peg prices, and, while doing these things, although he said nothing about it in his actual speech, to increase extensively the amount of money now provided for the States for housing, hospitals, schools and all their other requirements.

Mr Pollard - I think you are losing your punch.

Mr MENZIES - My friend may be right. There is nothing so softening as never to have an opponent worth fighting. Let me say something about pegging prices and unpegging wages. I remind the House that the basic wage is a minimum wage. Except in the merest nominal fraction of the total number of cases, it does not represent the actual wage paid to a man. We all know that there has been for years now in Australia a competitive wage level and that the pure basic wage-earner either is a rare bird or is non-existent. Therefore, wages are not pegged at this moment and were not pegged by the recent decision of the Commonwealth Arbitration Court. The fact is that the judges of the court said, " We will not continue to make quarterly adjustments of the minimum wage. What people will pay above the minimum will depend entirely on the circumstances of each case ".

When we fix prices, we do not fix minimum prices; we fix maximum prices. Therefore, what the right honorable gentleman is seriously proposing is that the maximum price that may be charged for a commodity shall be fixed, but that wages, which are an element in the cost of that commodity, shall be allowed to run completely free. If he wanted to get rid of profits in business, that would be a very effective way to do so. Never have I heard anything more fantastic. If he had said, is he did at the finish, " I am so keen on pegging prices that 1 am prepared to peg wages, profits and all the other elements of prices that would have been another thing. That would be a war-time economy. It would involve a controlled community from top to bottom. But to begin, as he began and as, no doubt, he will continue during the next few days, by saying that he really believes that we could hold the price level and, at the same time, allow all the factors affecting prices to run free is as silly as a man can imagine.

Let us consider the other factor that I referred to - the States. We, as a government, have provided more millions of pounds for the States from Commonwealth resources than have all the previous governments in the history of the Commonwealth put together. In fact, as a rule - practically an unbroken rule - all the previous governments controlled the States by allowing them to take their share of the loan raisings and no more. What we have done, as a government, has been to give the States the whole of the proceeds of the loan market. Under some criticism from our opponents in this place, we have borrowed large sums of money from overseas and the counterpart funds obtained in Australia from the sale of the proceeds of those loans have all been used to support the States' work programmes. Over and above that, we have, at the best, had to draw upon trust funds and similar funds to support the States' programmes and, at the worst, to levy vastly increased taxation in order to make up the difference between loan raisings and the money required for the States' works programmes. Except when the money was raised by taxation, that support of the States' works programmes contained some inflationary elements.

But what does the right honorable gentleman say? He says, " I do not complain at you for doing so much; I attack you for not doing more. It is monstrous that the State governments should not have all the money that they require for all the things that they want to do" - many of which, I agree, are of great importance and of great social significance. He says, "You, the Government of the Commonwealth, ought to provide that money ". It is very easy to say that this Government ought to provide £100,000,000 or £200,000,000 a year for the States in addition to what is being provided now, but it is not a bad idea to ask, as any ordinary householder would have to do, " Where is the money coming from? " i know that that is a strange and unpopular question. 1 do not think for a moment that the money would come from those honorable members opposite who are interjecting now, or from me, except as members of the community.

Where is the money coming from? That is a question that the right honorable gentleman never faces. He has tried this one on the electors two or three times already, without conspicuous success. Does he propose a heavy increase of taxes, so that the money to be paid to the States would be drawn from the purchasing power of ordinary citizens? If he does, let him say so. If he said, " I believe that the States should have another £100,000,000 a year and I propose to levy additional taxes to the extent of £100,000,000 a year so that they can have the money *', the people would be able to understand what he proposed, although their reaction might not be all that he desired.

Mr Bryant - You levied an additional £115,000,000 in March and did not tell the people about it beforehand.

Mr MENZIES - How right you are! We levied another £115,000,000, having got from the people at the general election, in the teeth of all your pleasing promises, a clear mandate to take whatever steps were necessary to deal with inflation. I love to hear the pack yelping. I face my opposition when I am arguing a case. Honorable members opposite know perfectly well that during the last general election campaign they were all drooling at the mouth. They said, " Nobody could resist these marvellous promises of hundreds of millions of pounds for nothing ". There they were, calculating their majorities. But we came out in a somewhat arid fashion and said, " We propose to attack inflation. We stand on our record. We ask you to give us authority to take whatever steps need to be taken to cope with inflation." The people preferred our request for a general mandate to all the attractive promises of the Opposition.

If I were honorable members opposite, I would not excite myself too much. I know I am exciting them, but I do not want them to excite themselves. They appear to believe that at the next time of asking the people will toss us out. Believe me, they will not, except, perhaps, on one condition, which the Opposition is not game to face up to. These interjections are a good sign. They indicate that this analysis is a little too much for some of my friends on the other side.

Mr Duthie - You do love yourself!

Mr MENZIES - It is perfect love in the case of the honorable member for Wilmor (Mr. Duthie), or is it absolute love? I always forget. Whatever it is, let him face up to the problem. He is a great politician Is he prepared to say to all the ladies in Wilmot over cups of tea, " We are going to increase taxes by £100,000,000 a year so that the States can have more money Of course he is not! If honorable members opposite are not prepared to accept that additional revenue would have to be raised in order to make great additional payments to the States, what is their scheme? They are opposed to overseas borrowing. They do not believe that we should have raised the interest rate to meet the local loan market, and so they do noi really expect that we shall obtain from the loan market the money we require. How would they get it? It is obvious how they would get it. In the crudest terms, they propose to inflate the currency in order to produce an additional £100,000,000.

Mr Bryant - That is what the Government has done.

Mr MENZIES - The honorable member may laugh, and as far as I am concerned, he may be as hollow as a drum while he laughs.

Mr Cairns Mr. Cairnsinterjecting,

Mr SPEAKER - Order! The honorable member for Yarra will refrain from interjecting.

Mr MENZIES - Nothing can get rid of the Opposition's necessity for once to face up to a choice in this mattter. It would obtain the money by taxing the people, by borrowing from other countries, or by inflating central bank credit and thereby adding fuel to the fires of inflation on the greatest possible scale. Let the Opposition, abysmally ignorant as it is of these problems, for once face up to an issue genuinely. These are simple, plain choices, and if the next Opposition speaker has in .mind some other way .of raising the wind no doubt we shall hear about it. But I maintain that, in the absence of some better suggestion, the Opposition's proposal is .ppe .to cure inflation .by adding .to inflation..

Mr Cope - Will the right honorable gentleman tell us bow "he put value 'back into the £1?

Mr MENZIES - The honorable member has not been .a member pf this Parliament very long, but he has been in i.t long enough now to know that .under the administration of the present Government Australia is in a state s>t unparalleled prosperity

Mr Cope - What about the right honorable gentleman?

Mr MENZIES - I know that .there arc some Opposition members whos.e stockintrade is misery and who would' die of frustration if they could not find an .unemployed worker. They devote .themselves .all the time to howling calamity. But such people constitute a very small percentage of the people of Australia. The fact is that the best and most sensible Australians in all walks, of life are satisfied that the country has never been more prosperous. During a recent by-election campaign the -Leader .of the Opposition and ,my -friend, the honorable member for Lalor (Mr. Pollard), .tried to explain to farmers that they were povertystricken and living in misery. I am credibly informed, .Mr. Speaker, that gusts of laughter swept the halls in which the right honorable gentleman and his colleague spoke; well, two gusts of laughter, one from pf th.e two -persons who usually comprised .the audience..

Mr Pollard - And bang -went the "Liberal party's former majority.

Mr MENZIES - Yes. It always does at a by-election

Mr Cope Mr. Copeinterjecting,

Mr SPEAKER - Order! I call the honorable member for Watson to order.

Mr MENZIES - The honorable member for Lalor and T are old .friends. He may feed the poppycock he has just uttered to the beginners, but .it will not do .for me. :1 would not insult him .by feeding such poppycock to him.

Mr Pollard Mr. Pollardinterjecting,

Mr SPEAKER - Order! 1 call the honorable member for Lalor to order.

Mr Cairns -Why does the Prime Minister -not deal with the motion?

Mr SPEAKER -. Order! If the honorable member for Yarra interjects again 1 :shall name him.

Mr MENZIES - I pause to repeat the observation that if one looks at what has been said in the motion one must conclude that once again the Leader pf the Opposition is out to add to inflation under the pretence of countering it. His one positive proposal about inflation from first to last has been that .prices should be pegged. I ,defy any one to discover anything in the right honorable gentleman's proposal that does not involve increased costs and increased expenditure without any increase of production, but with a consequent enormous pressure on price levels. Having proposed to create all the conditions that will impose enormous pressure on price levels, he says.

Increased prices are the cause of inflation, and 1 shall peg them ". Does he not realize that in the main the increase of price levels is the product .of inflation and that it arises from a state At affairs in which the capacity to pay exceeds the capacity to provide, and in which .the .purchasing power of the country begins to overwhelm .the supply of goods and services? Does he not realize that in those .circumstances i.t is folly to increase the purchasing power unless be is prepared to do all the things needed to stimulate production .and .increase the supply of goods available for purchase? Th.ese are elementary economic facts. y,et they all are .ignored or denied by what the right honorable gentleman has said.

I have said that the cause of inflation is, by and large, the enormous pressure of the monetary capacity to buy an inadequate supply of things available for purchase, and I apologize for saying anything quite so elementary. There are, pf course, special circumstances, and the Leader of the Opposition reminded us of one which J think ought .to be mentioned, because it is a superb illustration of one .of the follies which the Commonwealth COUr.t of Conciliation and Arbitration sought to remove when it decided to suspend automatic quarterly adjustments of the basic wage. Let us take the celebrated example of potatoes and onions. When the Acting Commonwealth Statistician announced the last quarterly figures showing the movement of the C series index, he pointed out, in language that perhaps has not been sufficiently observed yet, that if potatoes and onions were included and given their normal weight in the calculation of the index the increase would be substantial, and would range up to lis. a week. But he said that reports from representative vendors indicated that retail sales of potatoes had recently been in the vicinity of one-third of the customary level in many places, and that the available information was insufficient to calculate an index with current weights.

Let us just explain that matter a little. The Acting Commonwealth Statistician was saying, " One cannot tell what weight one should give to potatoes and onions unless one can discover whether their high prices were in fact caused by a scarcity that resulted in a consumption lower than usual, and if they have been so caused obviously the high prices have not entered into the cost of living and they ought not to be given the weight that they have been given in the past ". Of course, it is perfectly true - we do not need to be told - that if the people do not eat potatoes they will eat something else. But the point is that the prices of these two commodities have been at extravagant famine levels, and to take them into account in assessing quarterly cost of living adjustments in those circumstances seems to me to be amazing, and it seemed to the Acting Commonwealth Statistician to be so remarkable that for the first time he produced, in effect, two figures showing the movement of the index, with a warning that the first one might not be right. But the Leader of the Opposition says, " That does not matter a scrap. It all must pass into wages ". If he had his way it would pass into wages all over Australia, because every State and the Commonwealth would adjust wages quarterly, and this accident caused by potatoes and onions would end up by loading scores of millions of pounds onto production costs generally in Australia. The Commonwealth Arbitration Court, if I may say so. did well to say, " That sort of thing is not reasonable. We propose to examine the basic wage from time to time in order to see whether, having regard to the overall economy and the state of industry, some changes ought to be made in it."

I do not want to pursue that, because J want to- conclude as soon as I can; and I conclude by saying this: Our objectives, as a government, are in sharp contrast with those embodied, or implicit, in the motion. We have aimed, in the whole of our policies, at a balance between the demand for labour and the supply of labour. Occasionally, we have had to do some things which were unpopular. In our April provision, which has become known as the " little budget ", what we did do had a very direct bearing on, for example, the motor industry, a very great demander of labour and capital and, indeed, a very great demander of imported goods in a rather inflated import situation. What we said to the people was, " We want to produce some balance in these matters. It is true that we may, to some extent, restrain you, but if. as a result, we can have a state of affairs in which demand for labour is satisfield by the supply of labour so that everybody has a job, but without the obvious evils of over-full employment or the more obvious evils of unemployment, and that position of balance can be maintained, that is a very good thing for the country and. in itself, will have a very significant counterinflationary effect."

In the second place, we have aimed at a balance between the demand for goods and services and the supply of goods and services. We have, all along, emphasized that it is production that counts, that it is production that is the most active element in a counter-inflationary policy; and we have pursued policies of which many representatives of country and other districts could speak, which have been eminently calculated to improve productive effort and result in Australia - and not without effect if one looks at the indices of production in this country over the last six years.

In the third place, we have aimed at a balance between the demand for capital and the supply of capital. The over-demand for capital in Australia has had significant results because, if there is an over-demand for money the price of money will go up just as certainly as the price of labour and of goods will go up if there is an overdemand for these things, with a resultant increase of costs. In order to produce a balance between the demand for capital and the supply of capital we have gone to great trouble to assert, and maintain, the credit position of this country. It is all right to have calamity-howling here, but I want to say to honorable members that one of the things that gave me more pleasure than anything else on my recent visit abroad was my discovery of how the credit rating of Australia had grown, and how high and strong it was. Of course, if it were not for that high credit rating we should hardly have been in a position to obtain from overseas sources, as we have, such substantial sums of money, particularly in dollars, so urgently needed, as they were and are. to break bottle-necks and enable the development of Australia to proceed.

The fourth thing I want to say before I sit down is associated with all these others. The countering of inflation is not merely some academic notion. It has, of course, the most tremendous bearing on a lot of people inside Australia - on most people inside Australia. It is the one protection that can be afforded some of the groups of people who get a mention in the Leader of the Opposition's motion. But it is also intimately associated with our overseas credit and our capacity to get overseas investment, both public and private. I just want to emphasize that to honorable members. When we were discussing what has been called the " collective approach " on the question of securing convertibility of sterling with dollars - a matter which has attracted a great deal of attention and with which my colleague, the Treasurer, has had so much to do of late - it was agreed by every Finance Minister from every British Commonwealth country that to achieve convertibility abroad it was necessary to arrest inflation at home. It was agreed that we must secure financial stability in our own countries because, without financial stability we could never attract the investment from overseas that was so badly needed to encourage production and develop exports, and thereby to improve our balances in the sterling-dollar pool. This is all a completely integrated affair, and therefore the attack on inflation is, at the very same time as it is conducted, a blow for increased credit abroad and an increased flow of capital investment into the country.

We do not underestimate it, but we have long since faced up to the idea - and we have done some unpopular things in pursuit of the idea - that what we must aim at is a state of balance in all those factors so that with stability our financial problems will enable us to pursue development on a greater scale, that with stability we will attract people into this country with their skills and also with their funds, and that stability will itself, therefore, be the foundation on which the whole active development of Australia will proceed.

On behalf of my colleagues, Mr. Speaker, 1 must say that we may have made mistakes. In fact, undoubtedly, we have made mistakes, and undoubtedly we shall; but for the broad line of our policy we have no apology. We can only say that if the policy, if it can be called such, implicit in the Opposition's motion, ever comes into operation, all the work of recent years will be undone.

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