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Tuesday, 30 October 1956

Mr HAROLD HOLT (HIGGINS, VICTORIA) (Minister for Labour and National Service) . - The Opposition has waited until the last week of the present sessional period to launch a sort of omnibus motion of censure against the Government and, by implication, put itself forward as the alternative government of this country. Apparently, the Opposition has come to believe, at this stage of the parliamentary proceedings, that the Government is open to attack in all the directions included in this compendious motion of censure. The fact of the matter quite obviously is that, in order to restore to some partial degree the flagging political fortunes of the Labour party, honorable gentlemen opposite have taken this opportunity, on the eve of the forthcoming conference of Commonwealth and State Ministers, to produce some propaganda which, they think, will give a little encouragement to those whom they claim to represent here.

The fact, is that honorable, members opposite have, undertaken what is* admit,tedly, a difficult and unenviable, task. They have set out to try to persuade the average Australian wage-earner and family man that he is having a terrible time under the present Government. They are trying to tell the people of Australia who are, almost without exception, and have been for many years past, fully employed, and who have been earning the highest wages in their personal histories, and enjoying the most prosperous standard of living for years, that this Government has brought depressed standards to them as a result of the policies it has applied. We do not envy honorable gentlemen opposite that task, and it is not surprising that the arguments they advance make little impact indeed on the general run of wage-earner.

The Opposition's present line of attack is not novel. It goes right back to 1949. when the electors, who gave their verdict in favour of the present Government on 10th December of that year, were told that the Liberal party was out to depress the standards of the workers of Australia, was out to create a pool of unemployed labour, was out to attain a low-wage structure. Unfortunately for honorable gentlemen opposite, the record of the last seven years throws their propaganda back in their own teeth, because in those seven years the Menzies Government, in co-operation with its colleagues of the Australian Country party, has been able to give Australia a most remarkable record of employment, accompanied by a buoyant economy. In that time we have restored prosperity, given employment, and improved the living standards of the Australian people; yet now, at the end of seven of the most prosperous years Australia has known, we are faced with a motion of censure from honorable gentlemen opposite, which is designed to convince the general run of wage-earners that they have suffered under the present Administration.

I shall try to analyse, briefly, some of the elements of the charge now levelled. I shall start with the employment factor. We admit the obligation on governments, in this day and age, to provide opportunities of employment for the people, and we can claim with full justice that we have discharged our responsibility in that connexion in a manner that might well be the envy of any other country in the free world to-day. We have sustained a full employment situation that is without parallel in Australia's history, that is without compare in the history of any other highly industrialized country in the world to-day.

Mr Cairns - That always happens in times of inflation.

Mr HAROLD HOLT (HIGGINS, VICTORIA) - The honorable member for Yarra (Mr. Cairns), has been very vocal, and he tries to make a speech composed of interjections. He says that there is always full employment in times of inflation. I thought he was a better economist than that, because he should know that inflation in most countries has caused tragic unemployment when it has been allowed to get out of hand. It has been the determination of this Government to see that inflationary pressures are not allowed to get to the stage that unemployment will result from them. I say that the inevitable consequence of the alternative policy put forward this afternoon by the Leader of the Opposition (Dr. Evatt) would be mass unemployment in this country as our cost levels rose, making our goods unable to compete in export markets with, similar goods produced in other parts of the world.

Let me give some practical comparisons between the position in Australia and the position in other countries which are admittedly prosperous at the present time. The countries I shall take for my comparisons are Great Britain, the United States of America and Canada, each of which is enjoying a high level of prosperity, each of which would claim it has provided full employment for its people. There is only a minor degree of unemployment in some parts of Australia at this time. The unemployment benefit statistics show that unemployment in Australia is about one-third of 1 per cent. of. the work force of this country. The ratio of unemployment in the United Kingdom is three times that percentage. The ratio in Canada is five times that percentage, and the ratio in the United States of America is nine times that percentage. Yet Great Britain, the United States of America and Canada are all prosperous countries where people are enjoying better standards of living than they have known for many years.

Now I turn to the wage level, reference to which has been made by honorable gentlemen opposite. They completely mis* interpret the Government's approach to the wage structure of this country and maintain, by constant reference to the basic wage level, the illusion that most of the people of Australia have incomes related solely tothe basic wage. The fact of the matter is, of course, that the average weekly earnings of the general run of Australian wage-earner are very much higher than the basic wage level would suggest. The average wage in June, 1955, was £17. In June 1956, it was £18, a very much higher wage than the nominal basic wage rate would indicate. When one associates that with the fact that nowadays so many members of families are employed it is easy to realize that the income coming into the average Australian home to-day has never been higher nor had greater purchasing power.

High wages associated with full employment have produced a situation in which the number of motor cars on the roads has more than doubled in the life of this Government. In addition, there has been a phenomenal increase in the use of laboursaving devices in the home, such as refrigerators and washing machines. Even the honorable member for East Sydney (Mr. Ward), who works himself up into a fever of indignation on the housing situation, has obviously not taken the trouble to study the figures revealed in the last census. Had he done so he would have found a most significant increase in the number of people who now occupy their own homes, which they have either paid for in full or are in process of acquiring on time payment. The 1947 census showed that 52.6 per cent, of home occupiers in Australia were homeowners or were buying their homes. When the 1954 census was taken, this proportion had risen to 63 per cent. This was really a remarkable and significant increase which revealed the improved prosperity of the average Australian wage earner.

I do not want anybody outside this House - there need not be any room for doubt inside - to be in any doubt as to the general economic objective of this Government. Our objective is, as it has been throughout our term of office, to sustain prosperity - maintaining full employment, giving the highest effective wage that it is within the capacity of industry to pay, producing improved standards of living, and enabling Australia to develop at a rapid rate in terms of industry and population growth. That, in essence, has been the policy of this Government, and it has been productive of the results which I have already indicated, lt is because of our very determination to maintain those standards that we have adopted the policies which have been indicated by the Prime Minister (Mr. Menzies) and the Treasurer (Sir Arthur Fadden) in the earlier part of this debate.

Our approach to present economic difficulties has had two main aspects. We are not denying the existence of difficulties. In any period of rapid expansion and in any period in which a government is seeking to maintain full employment for its people, and a high rate of development and industrial growth, there are certain to be economic difficulties. That is peculiarly the case in Australia, because of the nature of our economy. We do not live in a closed economy. We are, per capita, one of the most considerable trading peoples in the world. Consequently, we cannot be regardless of the level of our own cost structure if we are to maintain our economy in a state of healthy balance. We must maintain policies, internally, which will enable us to produce our export goods at a price level which will be competitive with those in the world around us. Therefore, we have had to take abnormal measures, from time to time, in order to preserve that balance.

The two main matters that have concerned us have been, firstly, the protection of our balance of payments, and secondly, the removal of excess demand inside Australia. In protecting our balance of payments we have been driven to the restriction of imports, to the encouragement of overseas investment, to efforts to encourage further exports. In order to remove excess demand we have, by way of reducing the pull on prices and reducing the demands for imports, imposed credit restrictions, imposed higher taxes, kept defence expenditure at an earlier level, held immigration to a lower level of intake than that which existed last year, held our Commonwealth works to the nominal level of last year, and limited State loan expenditure. In addition, State works, for which loans could not have been raised in any other way, have been financed, as the Prime Minister and Treasurer have pointed out, from Commonwealth revenue instead of by means of credit creation which, perhaps, would have been permissible if there had been less pressure on our resources than there has been in recent months.

I stress those measures because honorable members opposite and some of the spokesmen for the trades union movement have tried to make out a case to show that we, as a government, have concentrated on the wage factor only as being the element which had to be restricted in order to preserve a balance in the economy. That, of course, is quite untrue. Our measures go back, first of all, to the so-called " horror " budget of 1951. Those who charge us with encouraging profiteering have, apparently, overlooked the fact that, in that budget, we increased the charge on companies from 7s. to 9s. in the £1. More recently, in the autumn of this year, we took certain measures which were designed to reduce the pressure on the economy. Again, we did not hesitate to impose taxes on companies, and we did not hesitate to impose other taxes which were politically unpalatable to many people inside Australia. But we did that in the national interest, and we think that the results are being demonstrated in the greater degree of stability that is to be found in the Australian economy at this time. The supply of, and the demand for. labour have been brought" much more into balance. Credit has been related to the needs of the community, without promoting excessive pressures. The fact that all these things have been done shows that the Government has not concentrated, as the Opposition has accused it of concentrating, on the place which the wage element occupies in the economy of this country.

I said, earlier, that our approach to the wage level was entirely realistic in contrast to the theoretical and dogmatic approach of honorable members opposite, who seem to regard higher wages as necessarily being the best wages. The Government believes in the highest effective wage, because the real test of the wage is what it will procure. The highest effective wage must be related, quite obviously, to the capacity of industry to pay the wage. If the wage level is allowed to reach a point at which industry cannot compete with overseas industries, and if we are unable to finance the imports of materials and equipment which are essential for the successful conduct of Australian industry, unemployment will be the inevitable result.

Honorable members opposite, who claim to be spokesmen for the trade unionists and wage-earners of this country, will lead those wage-earners into a situation of peril if they allow the cost structure of this country to become out of line with competitive overseas price levels. The Government has been very mindful of that fact. Before the Commonwealth Arbitration Court, we have quite consistently adopted the attitude that the wage that the court should award is the highest effective wage that is within the capacity of industry to pay.

Mr Curtin - That is an old one.

Mr HAROLD HOLT (HIGGINS, VICTORIA) - It is an old one. lt is an old truth which many people on the Opposition benches have apparently yet to learn. Yet, I find among responsible trade union officials an acceptance of that truth. I find amongst them a recognition of the fact that it is to higher productivity that they must look in the future for better standards. The same realism is not to be noticed either in the Leader of ihe Opposition or in those who sit behind him in this House. It is time that the lesson was well and truly learned. Unless it is learned, honorable members opposite, if they find themselves in government, will assuredly lead those who have put them there in the mistaken belief that they will represent their interests into the disaster which inevitably will flow from the kind of policy that we have had put before us by honorable gentlemen opposite at this time.

Those who argue that the logical course to follow is to fix the highest wage that it is within the capacity of industry to pay should realize that if that were done it would be absurd to tie the wage to an entirely unrelated movement in the C series index. One of the mistakes that is often made is to assume that the C series index is a cost of living index. It is nothing of the sort. It has never set out to be a cost of living index. It has been presented as revealing movements in the prices of a number of specified items in the Australian economy. It has never been a cost of living index. If any proof were needed, the recent illustration provided by potatoes and onions gives ample demonstration of it. The price of potatoes and onions is high on account of the scarcity of those commodities. If they are scarce, then, quite obviously, people are not consuming as much of those items as they have consumed in earlier periods. And, if they are not consuming as much of them, how absurd it is to award a wage which purports to give the purchasing power necessary to consume those items in the same quantity as that in which they were formerly consumed.

Mr CLYDE CAMERON (HINDMARSH, SOUTH AUSTRALIA) - Would that not apply to every increase?

Mr HAROLD HOLT (HIGGINS, VICTORIA) - No, but, to give another illustration, it does apply to increases of power and transport charges made by State governments. They do noi proceed from increased capacity of industry to pay. Indeed, mostly they reflect a decreased capacity to pay, but they enter the C series index and affect the wage structure in those States which at present tie wages to the C series index. The absurdity of the position should be readily apparent, and one would hope that the dangers would be equally apparent.

If time had permitted I should have liked to examine the situation with regard to profits. We have already demonstrated that, where the necessity arises, we will step in and tax company incomes in order to reduce inflationary pressures. Too often people disregard the fact that movements in nominal profit must be related to movements in the number of companies, and to the purchasing value of money at any particular time. For example, it is quite fallacious, to compare company incomes to-day with those of, say, 1948-49, the last year in which honorable gentlemen opposite were in government.

Mr CLYDE CAMERON (HINDMARSH, SOUTH AUSTRALIA) - The right honorable member has just made that comparison in regard to wages.

Mr HAROLD HOLT (HIGGINS, VICTORIA) - I have not. The wage movement between 1948-49 and the present is to be found in the Commonwealth Statistician's figures, and the honorable member will see that in the interim wages have approximately trebled. In 1948-49 19,892 companies were assessed for tax, but such has been the rate of industrial development in Australia, especially since this Government took office, that by 1954-55 the number had grown to 27,978. If we relate the movements in the C series index to the income earned by companies in that year, and take into account the increased number of companies, we find a remarkable parity between the rate of income and dividend distribution for the year 1954-55 - the last for which I have figures -and the year 1948-49.

Strong competition helps to keep prices down. I recommend honorable members opposite to examine the C series index. They will find that in recent years the smallest movement has occurred in the clothing item. That industry has been the most competitive, and, over a significant period, the movement in prices has been only about 1 per cent. Obviously, that is because a stronger degree of competition is found in the clothing industry than in almost any other. As earlier speakers have pointed out, while it is our function as a government to ensure that the pressure of company earnings does not become an expansive factor and increase inflationary forces, we also recognize that the reinvestment of company income sustains employment and enables industry to operate at a reasonable degree of efficiency.

I would conclude on this note: The Government has acted in the national interest as it set out to do when it took office. It has not sought support by yielding to pressure from any particular section. From time to time we have had to do the unpopular thing, in the economic sense. We had to do it in 1951 and again in the autumn of this year. It was necessary in order to restore balance to the economy and to ensure that our objectives of sustained prosperity, sustained employment, improving living standards, and a rapid rate of industrial and national growth could be attained. Honorable members should examine the terms of the motion of censure in the light of this Government's record of the last seven years.

Mr SPEAKER - Order! The Minister's time has expired.

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