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Tuesday, 29 November 1960

Mr REYNOLDS (Barton) .- It would be almost amusing, but for the sad effects that are likely to flow from this legislation, to listen to the verbal contortions of the honorable member for Barker (Mr. Forbes) in trying to justify the Government's latest imposition of credit controls as well as higher interest rates and increased sales tax on motor cars. I suppose that, having said all that he has said in this speech to-night, the honorable member will still parade before his constituents as an exponent of economic liberalism. The honorable member, in company with other honorable members on the Government side, has been unable to produce economic stability in the country, and, having been unable to do so, he and his colleagues have made a virtue of instability, calling it flexibility. The Government, they say, has had to contend with many unknowns. They cannot be certain when the Budget is framed that there will not be changes in it. Surely a Budget that was framed only a few months ago should provide some sort of continuity for the people.

This rs a policy of brinkmanship in economic affairs such as we have known in other- days in foreign affairs. Apparently, the economy is to be forever balanced on a razor's edge. Surely that will be heartening news to private industry. Industrialists have to make plans, not for a month or two, but for investment and recruitment of skilled labour that will endure over a considerable period before they reap an economic reward. It must be disheartening to them to hear a spokesman for the Government say, " We might have to change our plans month by month ". Does the Government ever give consideration to the effect on people and organizations in the community who have to exist in an atmosphere of everchanging government economic policy?

In this case, a sales tax of 40 per cent, is to be imposed on private motor vehicles; and motor cycles and scooters will attract a sales tax of 25 per cent. This impost is not only vicious; it is also highly discriminatory. It means- that a person who buys a car costing £1,000 must pay £400 more to this Government in sales tax. Just imagine any other asset worth £1,000 bearing an additional taxation impost of £400. It is a most savage impost in anybody's language. The present imposition is said to be temporary, but in 1956 when the Government increased, sales tax on motor cars from 16 J per cent, to 30 per cent., it stated that the impost was to be only temporary. Motorists' organizations ever since have been reminding the Government of its promise that the increased tax was supposed to be only temporary. Only a couple of months ago, the Chamber of Automotive Industries in its journals reminded the Government that it was time the temporary impost applied in 1956 was removed. What a shock it must be to those industries and all subsidiary and affiliated companies to learn that not only is the temporary impost of 30 per cent, being retained but in fact another 10 per cent, is to be added. After all, the Government stated in 1956 that conditions were of such a kind that the impost was demanded. Conditions have changed considerably since 1956 but the tax was not removed. It has remained, and now we are confronted with an additional impost of 10 per cent. In effect, the sales tax on motor cars has been increased since 1956 by 140 per cent. - from 16$ per cent, to 40 per cent. In addition, the petrol tax of ls. Id. per gallon remains. Motorists have to pay sales tax on tires, customs duties, primage and all sorts of hidden imposts. Now, to make things even harder for the motorist, interest rates are to be higher and money will be harder to get.

In the financial year 1959-60, the Government reefed £144,000,000 from the motor car industry in Australia, including £77,000,000 by way of sales tax. In other words, sales tax on motor cars yielded 47 per cent, of the total sales tax raised in Australia on all commodities. This impost is not only vicious, but also discriminatory. If the motor car industry is to be branded a luxury industry - and the Opposition does not believe that it should be so branded - what is the reason for the discrimination against this industry compared with other luxury industries that have been a severe drain on our overseas balances? 1 have one other objection to this proposal, and that is its effect on employment. Already, within the first week of its operation, the newspapers have reported about 300 dismissals in the motor industry in various parts of Australia. From a humane point of view, what an inopportune time it is to cause unemployment. Just imagine the feelings of a man and his family when he is put out of work virtually on Christmas Eve. One would have expected the Government, which is fiddling about with controls, to do something to plan retrenchment to ensure an orderly transfer of workers to other forms of employment.

Mr Luchetti - What about those who are leaving school?

Mr REYNOLDS - The effect will be greater in that direction also. The workers who are being put out of employment will have to compete against the mass of young people leaving school and coming on to the employment market. The depressing effect upon the motor industry will not be confined to that industry. The lack of confidence in the motor industry will spread into other sections of the economy. I am reminded that one-seventh of the people in employment in Australia are engaged in the motor industry or sections of industry associated with it, so that anything that is done to depress the motor industry will have substantial effects on the employment opportunities of the people as a whole.

Even if those who are disemployed from the motor industry find alternative employment, the chances are that their earning capacity will be depressed because they probably will not be able to utilize thenspecific training in their new employment. They might have occupied senior positions and they might have been receiving higher payment because of their skill and standing as administrators or foremen. Probably, they will not be able to carry their standards and their status with them. That is one of the reasons why we object to this sharp, jolting imposition.

The motor industry and associated industries, employing one-seventh of all the workers in the country, are the biggest employers in Australia. They employ about 300,000 people, of whom about 113,000 are directly engaged in the manufacturing section of the motor industry. So we are not dealing with peanuts. This is not a small industry. It is very large, and anything adverse that is done to it will have a substantial effect which will permeate the rest of the economy and affect business confidence. Employment opportunities in other industries must be affected.

The Government is not making this vicious assault on such a substantial industry by means of sales tax only. This is to be accompanied by credit restrictions and high interest rates which will have a further effect. It is noteworthy that 40 per cent, of the people employed in the motor industry in Australia are immigrants. We have brought these people here on promises of security of employment. We have promised that they will be secure in their economic life and able to live as happy citizens. When it was speculated that there might be some increase ir: «des tax on motor vehicles, Mr. Daunt, the secretary of the Federal Chamber of Automotive Industries, commented on this subject. This was before the announcement of the 10 per cent, increase which I do not think even the most pessimistic prophets in the industry anticipated. Mr. Daunt was reported as follows: -

Any new increase in sales tax would mean large scale retrenchments of thousands of skilled workers of whom many were migrants.

What encouragement will the Government's proposals give to young boys and girls, who are leaving school, to accept apprenticeships in automotive industries in which continuity of employment can no longer be guaranteed to them? Because of the imposition of a high purchase tax and credit restrictions in the United Kingdom - the very measures that this Government now proposes - consumer demand there has fallen off considerably. This has resulted in lower output, which in turn has meant a loss of some of the economies of large scale production and consequent difficulty in competing on the markets of the world. If this is true of industry in the United Kingdom, how much greater will be the effect of such measures in a country in which industries are still trying to establish themselves?

A sum of £25,000,000 has been invested in research, design and tooling up for the production of the Falcon car. Now, it has hit the market at this time! Its manufacturers were persuaded to invest in this country by the windy words of the Government which is now doing what it can to ruin the enterprise. This is the kind of encouragement that the Government gives to overseas investors! Our problem as far as overseas funds are concerned will be heightened by this action. I do not think that it requires any great prescience to see that this policy will influence other people who are contemplating investment in this country. This substantial and jolting imposition of sales tax - the sudden change of policy that the Government calls a change of tactics - must have an effect on potential overseas investment in this country. It will serve to worsen our economic position internationally.

Another matter to which I have already adverted is the whole manner in which the Government has introduced this measure. Like so many other measures of the Government, it is savage, crude and clumsy. They are the words with which I characterize the action of the Government. I have referred to the despoiling of the investment of a great organization, the Ford Motor Company of Australia Proprietary Limited, which has invested £25,000,000 in the Falcon. The Government has claimed that it has continuity of policy and that only its tactics change. Does the Government not think that people who invest money in Australia are entitled to some continuity of security in their investment? Are they not entitled to make plans that can be rewarded only over a number of years? The Government should think of that when it talks about changed tactics or changing policy.

This measure will affect, not only the manufacturers of motor cars, but all the other people in allied industries. In the districts in which I move, I see many people who are engaged in selling cars. They have invested substantial amounts of money in constructing substantial, attractive premises. They have employed salesmen whom they have trained, and sent to technical colleges and schools of management.

The proprietors of these businesses have had a substantial capital outlay. Yet much of their business will go overnight! The Government has planned that that shouldhappen. I do not think that the Australian community is very proud of that fact. The proprietor of every service station, in anticipation of continuity of patronage, has invested in various ways. Those people will go to the wall. If they do not, the Government's measures will have been in vainbecause the Government is determined that the existing demand for motor cars shall not continue. It is determined to send these people to the wall.

I should like to know how much has been invested in the motor industry in the past twelve months in anticipation of the maintenance of the existing rate of salestax or, at least, in anticipation that sales tax would not be such a vicious amount as- £400 on a motor car costing £1,000. Telegrams have been sent to every senator. The people who are affected feel strongly about this. That statement is not eye-wash. They do feel strongly about it. This is a. callous, crude and clumsy action on the part of the Government. Of course, therehave to be changes in our economicclimate, but they should be made at theright time and in an orderly, scientificfashion.

In this debate, the Opposition is not. merely trying to say to the Government, " I told you so ". But I remind the House that when import restrictions were abolished overnight, we said that that wastoo sharp an action because it was not possible to measure the likely effect. It has become obvious since then that the Government should have relaxed importrestrictions in an orderly fashion, testingthe effects from time to time. However. the Government abolished import controls overnight and is now confronted with the necessity to take equally jolting action. It has imposed a vicious sales tax, reinforced with a vicious increase in interest rates and a tightening of credit.

The Government has hit people with everything and expects them not to resent it. Of course, they resent it. The Government will discover that when it confronts the electors in twelve months' time at a general election. The Government has asked the Opposition to suggest what it should do. The Government should have taken notice of what we said in February. It should have retained selective controls. It should have remembered what happened in 1951. The Government had already been blessed with experience in this respect, unfortunate though that experience was.

With the assistance of the previous Labour Government and of marvellous wool exports, Australia had built up between £800,000,000 and £900,000,000 in overseas funds. But the Menzies Government, like a spendthrift, dissipated so much of it in a matter of months. Again to-day, when we badly need essential capital goods from overseas we cannot buy mem because the Government has thrown away our overseas reserves. This is the sort of jerks and jolts policy that the people have resented, just as they resent particularly the measure before the House. This is the kind of policy that has characterized the Government for a number of years.

I say that the people who are responsible for a substantial amount of the investment and employment in this community ought to be protected from this fits and starts, jerks and jolts, policy of the Government. They are entitled to reasonable continuity in Government policy so that they will be able to plan their operations. It is all right for the Government to plan its operations, but what about other people and other organizations? They ought to have the right to plan, and they ought to be protected from the overbearing, unscientific and fits and starts procedures of the Government. It might well be that there ought to be a greater diversification of employment and investment as a result of government action. If the Government thinks that more of our resources should be channelled into certain avenues, the necessary measures should be introduced progressively, and in an orderly and smooth way in accordance with a clear plan.

The Government's violent switches of policy derive principally, 1 would say, from one main thing. As I said when I first became a member of this House, this Government has never had the courage, or at any rate the will, to have a national plan of development for Australia. I remember that the honorable member for Mackellar (Mr. Wentworth) mentioned this very fact in his speech on the Budget. The violent switches in the Government's policy result from a lack of clear national planning by the Government. The Government uses stop-gap measures in order to try to correct the worse effects of its laissez-faire policy. The governments of most countries, whether socialist or otherwise, have a five-year objective for national development. They take into consideration their national resources, they have some idea of the things that they want to do. In a word, they know where they are going. They plan so that progress can be made in an orderly fashion. They have objectives, they have integrated programmes, they have plans that take into account such matters as immigration, development projects, housing, decentralization of population and industry, imports and exports, the Public Service, and all those other things which are inter-related. But this Government never does anything like that. It has never got round to having a complex, scientifically established national plan of development for Australia. Not having that, it has been forced into this fits and starts policy, with changes, corrections and adjustments coming month by month.

One of the other things to which I am particularly averse in relation to the Government's proposals is that they will ruin the export potential of the Australian motor car industry. Only a short time ago the Government was speaking in commendatory terms of our growing export of cars. What does anybody think that the Government's present proposal will do to our export capacity in that regard? The increase of sales tax on cars will cut down local consumption of cars and thereby rob us of the economy of scale that operates in relation to volume production. The Government apparently prefers that we export more of our iron and steel. That seems to me to be a reversal of what the Government described as " a growing mature economy ", in which we would manufacture and export goods. It is export of goods which will build up our economy and maintain employment. But we are going to reverse that process and export only raw materials and semi-processed materials in order to earn a few pounds with which, presumably, we will pay for the import of luxury goods.

There is no guarantee that the Government's proposals will assist our overseas balances. They may well have some effect, but I do not think they will have the effect that the Government pretends or expects-. It may be found - and this will interest members- of the Australian Country Party - that people will still buy cars despite the increased- prices, and go without other locally produced goods in order to offset the increase-. They may cut down on their purchase of foodstuffs. They may buy cheaper cuts of meat,, and reduce their purchases of. other local commodities in order to' be able to continue: to buy imported goods.

As the honorable member for Melbourne Ports (Mr. Crean) said, the Government's proposal is a crude weapon. It is not a' scientific and precise1 instrument: If the' Government wants to stop' the import' of cars and similar goods let if do the thing' straight' out and be done with it, arid everybody will know where they are. Under its' present' proposals it will put a vague sort of blanket over the import of motor cars, but it will not stop them from coming into the country. There is no guarantee that imported cars and parts will still not cause a serious drain on our overseas resources.

The Government should have foreseen the effect of abolishing import controls early this year. If did not need to have any marvellous insight to be able to foresee' what was going to happen. After all, wool prices were coming down. They dropped from 60d. per lb. to 48d. per lb. after having been up to 240d. per lb. earlier. There was a. downward trend in wool prices. The Government had* or should have had; the benefit of its' experience in' 1951, when it" opened l the floodgates- to imports. Also, surely,, it had the realization that we had been living to a great extent on money borrowed from overseas, or on money invested from overseas - a rather tenuous kind of thing to rely on at any time. All these things should have guided the Government, but apparently it chose to take no notice of them.

One of the things that distresses me - and I raised this with the Treasurer (Mr. Harold Holt) the other day - is that while the Government is still applying thc32 rather unscientific negative measures in order to try to stifle imports it is not doing very much about engaging in a positive project to improve our exports. There has been a lot of talk, but not very much action, in that direction. This distresses not only the Opposition, but also people like the president of the New South Wales Chamber of Manufactures; Mr. J. N. Walker, whose remarks on this subject recently were reported as follows: -

Export recommendations to the Australian Government had been ignored over a number of years, the president of the N.S.W. Chamber of Manufactures, Mr. J. N. Walter, said yesterday.

Mr. Walkeris reported as saying.

It is pointless to attempt to create an export consciousness among manufacturers and the public if the Commonwealth' Government remains unconscious of its own responsibilities in the export, drive.

He' added-*-

The Government has had many' opportunities to" make a serious contribution towards our export problem through it's taxation policies.

Trie most alarming and frustrating fact, however, is that to judge by- recent Government statements there is still no intention to take action on these matters.

Mr-. Walker-goes on at some length ort this subject. The- fact is that, by it's piecemeal! spasmodic procedures the Government, in attacking one. set of problems, immediately creates, or intensifies another set ofproblems. Earlier this year it said it was attacking inflation by abolishing import controls. It not only failed to curb, inflation, but it also- set in motion a> catastrophic drain on our overseas balances. Now,, in- a clumsy and imprecise way, itsets out to curb the drain on our overseas balances by imposing, severe credit restrictions* a.- dear- money policy,, and a vicious* sales-< tax. impost- on- private, motor vehicles.Whatever effect these measures- may have' in curtailing imports they must certainly have the effect of forcing up costs of production and merchandising, grossly inflating prices, and1 inevitably creating unemployment. The Government's measures are always too late, too piecemeal, too negative, too contradictory, and altogether too stupid.

Debate (on motion by Mr. Barnes) adjourned.

Sitting suspended from 5.54 to 8 p.m.

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