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Tuesday, 29 November 1960

Mr BURY (Wentworth) .- The honorable member for Melbourne Ports (Mr. Crean) has indulged in an exercise which is, by now, well familiar to us - that is, the exercise of condemning the Government for not tackling inflation and then condemning all measures that could possibly be taken to arrest inflation.

Once again the honorable member for Melbourne Ports has harped on the action taken in February to free imports from control. Let us consider the circumstances surrounding that action. Early this year there was a huge upsurge of income, and the results of previous expansion were beginning to be felt. The factors then operating included perhaps the most powerful single factor, which was the grading up of wages as a result of the decisions of the Commonwealth Conciliation and Arbitration Commission in the basic wage case and, later, in the margins case. This added a steady stream to Australian incomes - a stream which could not possibly be satisfied by the goods coming on to the market at that time.

In those circumstances, the alternative to freeing imports was an even steeper increase in prices, because the capital goods were there and the purchasing power was there. Unless it were fed by corresponding goods from some source that spending power would have shown itself in a further steep upward movement of prices.

Mr Cope - How were the profits associated with this condition?

Mr BURY - That is entirely a side issue. Of course, as the inflation process goes on, profits rise. Let us for a moment analyse what our imports are. Listening to the honorable member for Melbourne Ports anybody would imagine that typical imports were chickens in tins and frogs' legs in aspic - all the things which, relative to the total forces involved, are mere trivia. Roughly 85 per cent, of Australia's imports bill goes on capital equipment, raw materials and commodities like oil. These raw materials are of various kinds which are processed by industry. So let us look at what would have happened had we not freed1 imports when we had this great surge of income. A very large proportion of these imports was entering the country in virtually unlimited quantities before import licensing was lifted. There was no great bar on the import of raw materials or even capital equipment. Even if imports had not been freed there would still, in fact, have been a considerable upsurge of imports. Remember what those imports are. They are very largely raw materials, and things for processing in Australian industry. If they were cut off by the reimposition of import controls in any substantial sense the necessary corollary would be the rationing of materials and capital equipment to Australian industry. That is the basic fact about this.

In the present circumstances, what is the Government to do? Whatever one may think of the past, what would the honorable member for Melbourne Ports and the Opposition do in the present situation? Apparently they would reimpose import controls, which, as any one who understands those matters would know, would lead to a tremendous surge in prices, making inflation worse than it is already. If some members of the Opposition do not think that that would be the effect of reimposing import controls I look forward to hearing them and the explanation they have to give. Confronted with the present situation the Government has taken its present action which is, as the honorable member for Melbourne Ports said, designed to damp down economic activity. That is its purpose.

Let us have no mistake about it. Australia cannot afford to keep on at its current level of incomes and its current standard of living, because if we kept on at our present rate we should go bankrupt internationally. By some means or other the more exuberant sections of the economy have to be slowed down. Perhaps two of the main arbiters of change in the economy are the building industry and the motor vehicle industry. One, the building industry, is to be slowed down, outside the residential sphere, but no taxation is involved in that. The other, the motor vehicle industry, is highly important to other sectors of industry, and bears on almost everything, directly and indirectly, in the way of employment and of materials involved. So this sales tax increase will have repercussions on other sectors. If it does what it is designed to do - slow down the motor car industry - it will have other effects. Some of the changes it will produce are important in themselves.

The motor car industry has recently been consuming much too large a share of our available steel supplies. Any one who travels, even quite casually, in country areas realizes the effect that the shortage of steel has on the provision of things like fencing and fencing posts and many other items. Steel for use in many directions is short, so steel has had to be imported. One of the big surges in our import bill has been produced by imports of steel. This would be very nice if we could go on at our present rate and afford to meet the bill; but, in fact, we have to do something to slow things down.

Do not let any one suppose that the Government's action is going to throw the motor car industry into a state of depression. The elementary figures are here. In the September quarter of this year motor registrations reached 333,000. Last year more than £212,000,000 was channelled by hire-purchase companies into the purchase of motor vehicles - an increase of £35,000,000. The honorable .member for Melbourne Ports mentioned the efficiency of the motor car industry, which is certainly high and increasing. But the real reason for the increase in car sales is a combination of a much higher level of personal incomes and greater hire-purchase .facilities. Both these factors have led to purchases of motor vehicles at a rate which the country clearly cannot afford.

Even if the motor car industry is hit by this sales tax increase, which is unpleasant and regrettable in itself, the fact is that the industry is certainly not expanding at any but ;a very :fast rate At present. I have not the actual employment figures with me, but a recent survey showed that in the transportation 'equipment group of industries, which, -of course, covers motor vehicles and other .things closely allied to them, 66:9 per cent, of the factories and 39.5 , per cent, of .the employees were working overtime. The average hours of overtime worked in the week to which the survey related were seven per .person working on overtime and 2.8 per employee over the whole group .of industries.

In the face of this kind of development, the Government is faced with the very unpleasant necessity for slowing down this activity, which has important effects on the import hill. The .following figures are freely available. In the September .quarter of this year, the motor car industry, directly or indirectly, was responsible for imports at the rate of £200,000,000 a year, compared with a rate of £152,000,000 a year in the September quarter of last year - a rate which was already high and was imposing a severe tax >on Australia's resources and capacity to earn foreign exchange. In one year, the rate of imports made by this industry had increased by one-third. In the September quarter of this year, registrations of new vehicles were 28 per cent, higher than in the September quarter of 1959 and 49 per cent, higher than in the September quarter of 1958. So registrations increased 'by -49 per cent, in two years.

It would indeed be invidious to single out the motor car industry as such for the treatment that has been .adopted if it were not for a number of factors. .One is that the present prosperity of the industry is due to the state of the economy as a whole and to the general inflation of incomes which has occurred. But for the buoyant state of the economy, the motor car industry would not have attained this buoyant pitch of activity. A second factor is that action taken in regard to the motor industry has such widespread effects in other spheres in slowing down the economy, and this makes the Government's action justifiable.

In this era. in which we live on -the verge or even beyond the point of .full employment, we must continually take action either to stimulate the economy, if it falls a little below the point of full employment, or to bring the economy back if it shoots above that point. When we consider the Government's measures, we find that in large part they are the kind of penalty 'that we have to pay for maintaining employment at such a high level. This is not unique to Australia. The United Kingdom, which has had a similar problem, 'has from time to time taken direct action 'with ^respect to the motor car industry, because, in the same way, in that country this kind of action has such widespread repercussions on the -whole of industry. The authorities there have had :to increase sales tax from time to time, and no doubt -have had to reduce it again.

But the United Kingdom authorities have also been able to do something that we have not been able to do. They have been able to take direct action in regard to hire purchase. If the State governments in Australia had been doing their duty with respect to hire purchase, they would 'by now have insisted that purchasers of cars on hire purchase put down much bigger deposits. The 'State authorities could have slowed down activity in that way. The Commonwealth has no power in (hat field. It has no chance of limiting directly, immediately and .adequately the activities of hirepurchase companies, which impinge very quickly and directly on the motor car industry.

Finally, Sir, I saAe -uplift wage awards made by the arbitration tribunals, and particularly the basic wage and margins, beyond a level that could be met by increased productivity. The Opposition has continually pressed for every kind of measure which makes inflation worse. Given this situation resulting from policies of this kind, what would the Opposition do now? Does it say that the economy should not be slowed down? Is its only answer the cutting off of imports with, as a result, severe inflation within Australia? What is the Opposition's alternative? If it has no better alternative than that, it should cease to criticize measures which, however unpleasant and undesirable in themselves, are essential to our welfare in current circumstances.

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