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Tuesday, 9 May 1961

Mr CALWELL (Melbourne) (Leader of the Opposition) . - Mr. Speaker, I should like to deal with the following aspectsof the Government's economic and financial policies - the failure of its imports policy,, the loss of overseas reserves, the absence of any connexion between its internal policy and imports, the question of interest rates and housing, and its policy, if there is any, on unemployment. The Government's economic policy is conservative, orthodox and doctrinaire. The Government seeks to cure the situation of the present with the methods of the past. To rely on experience is to be wise, of course, but it is not true that the blind following of the past is the safe course for this country to follow to-day. Often, that is the reckless course of the fool who leaps because he thinks he need not look.

In the fair weather of February, 1960, the Government became committed to a course of economic policy which Ministers entered on with all the sincerity of their limited imaginations. It seemed sound and safe because it conformed to> the financial and social prejudices, of a group long in office which preferred the catch-cries of the past to the hard work of thinking. So the Government mounted- the- tiger's back. Its policy was one which would have been all right if it had worked, but it. was one which Ministers felt they must stick by to the bitter end. If the Treasurer (Mr. Harold Holt) lets out a little bleat of doubt about import licensing or the depreciation of the Australian £1 the inward flood of imports or the outward fl'ood of money will' force either one thing or the other: So what did the Treasurer say to the International Monetary Fund through his deputy and negotiator,

Sir RolandWilson, who departed from this country without anybody knowing anything about it except Ministers - and not all of them - and who returned without anybody knowing that he had arrived back until somebody saw him in the streets of Canberra? According to the documents tabled by the Treasurer last Thursday afternoon, Sir Roland Wilson told the International Monetary Fund -

The Government has repeatedly stated and now reaffirms its intention not to reimpose restrictions on trade or current payments except in the event of a very serious balance of payments emergency necessitating a major shift in policy.

The expressions " repeatedly stated " and " reaffirms " are not the language of some one who really knows where he is going. The fact is that, in the words used in the document from which I have quoted, " a very serious balance of payments emergency " is here. That is the current economic situation, and that is why the Government has borrowed from the International Monetary Fund. That is why Australians are unemployed. That is why Australia must borrow to pay her creditors at a time when Australians are refused permission to borrow to pay their creditors. Australia is bankrupt, according to the memorandum to the International Monetary Fund, and according also to leading business executives and economists. There comes a time, therefore, when facts must be faced. This is such a time. We cannot go on as we are going, frittering away our last half-pence because we dare not admit that the nation is broke.

The first matter with which I want to deal is the failure of the Government's imports policy. The policy entered on fifteen months ago could have been described at best as a calculated risk. It amounted to this. No one likes restrictions for their own sake. No one likes import licensing as such, except those who are lucky enough to have import licences. For them, of course, it is the road to fortune, but for the rest of us it means exploitation. Australian industry should be protected by tariffs and similar measures and not by the granting of import monopolies. And it would be worth a great deal to Australian productive efficiency if we could get along without import restrictions.

It was argued that it was worth taking a chance in order to see whether we could really pay for our imports if they were unrestricted. But the Government chose the one time of all times when it should not have risked this. It chose the time when the economy was at last expanding after the stagnation enforced in 1956 by the last economic experiment. And so import licensing was abandoned just when it was certain that the demand for imports was at a maximum - when demand was certain to spill over into imports, pending the expansion of local production. With all the recklessness of the doctrinaire, the Government entered on its long-haired course.

There was alarm in March, 1960, when imports were running at £88,000,000 a month. If it had been known then that the monthly average for the next twelve months would be above that figure and that there would be no visible decline even by April, 1961, import licensing would have been reimposed forthwith. Of that I feel certain. But with £550,000,000 of international reserves and £200,000,000 drawing rights with the World Bank it looked not too bad and, to quote the Treasurer's words, " imports are sure to fall off as soon as we have restocked ". But month after month the same story went on and on, and month after month our reserves dwindled and we became more and more dependent on overseas borrowing in order to - to use a term familiar to those who follow the great Australian game of football - keep the ball in the air. Each month it was more urgent to be positive that import restrictions would not be reimposed, and so the Government became more positive.

The first breath of panic in the rake's progress was felt in November last. October imports were announced at just on £100,000,000, and the figures for the September quarter revealed that extra imports were not just in luxury items but, to use the Treasurer's words again, " right across the board ". In fact, the basic items seem to have gone up even more than the previously restricted tinned chickens, wines, whiskies and perfumes. All in a fortnight came the measures of 15th November. The fact that they have all been either reversed or substantially modified shows clearly enough how ill-considered they were. But by then it was too late to reverse the major policy decision of " free " imports restrained by credit restriction, unemployment and a stagnant economy. Even in November, Sir, it was confidently believed that imports in the new year would fall off. In January, it was believed that the March imports would be down; in February, it was believed that the April imports would be down. But here we are with the April figure just announced at the highest daily rate ever recorded. The Government proposed to reduce imports by credit restrictions in February last year, and if any one of us had been asked whether the Government's measures would work we would have said that they might in three months' time. Three months later we would have said that they would work may be in another three months. If we had been asked in December we would have said that by April this credit restriction policy of calling up the overdrafts of people who really need the money would certainly stem the flood of imports. Yet we find, on the Government's own admission, that the April figures reveal the greatest daily rate of imports of goods on record. Of course the Government has much to explain. It has to explain why imports have not fallen after fourteen months of the application of this credit restriction policy. There were only eighteen working days in April, because Easter fell in that month, and because of the Anzac day holiday, but imports for the month, according to official figures, were worth £86,800,000. I ask the question: When will imports cease to come in at that abnormal rate? When will the people of Australia who are out of work because of the flow of imports be able to look to the future with some hope that their jobs will be restored to them.

The story of our overseas reserves is somewhat the same. In its first ten years of office the Government reduced our overseas reserves from £630,000,000 to £512,000,000, despite the fact that it borrowed £1,200,000,000 overseas in that period. So, after ten years we have £1,300,000,000 less in national resources than we had at the start. In only one of the last six years have our resources risen, and the annual borrowings have got larger and larger. Twice during the period our resources fell to low levels - to £360,000,000 in July, 1952, and to £330,000,000 in April, 1956. Both of these falls were the result of a decline in exports. That is why we have to keep international reserves. Our exports are uncertain, both because of the risk of drought and because of the variability of export prices. If both drought and low prices happen together we must expect our reserves to fall by something like £300,000,000. If this occurs because of temporary changes of this nature we should not be forced to cut our imports correspondingly. We should have something to fall back on. Our orderly progress and development depend on just this - that our economy should not be at the mercy of droughts and drops in export prices. So, to be reasonably secure in an uncertain world, we must always hold at the end of a normal year something like £400,000,000 to £500,000,000 of international reserves - £300,000,000 to meet contingencies and, say, £150,000,000 as a working balance. Our drawing rights with the World Bank can then be regarded validly as a second line of reserves to meet a sustained drought or a delayed recovery in export prices. Those drawing rights would give us time to make any necessary adjustments.

But, Sir, what is the position to-day? Let us look at what is happening in the present financial year, 1960-61. Seasons have been good - the Government has said so. Wool prices are down a little. The first wool sales of the year showed a return of 45d. per lb. over the first two months. Then they averaged 47d. per lb, over the first four months, and over the first six to seven months the average rose to 50d. per lb.

Mr Luchetti - And the Government will not do anything about the prices.

Mr CALWELL - It will not do anything to protect the wool-growers against international exploitation. But prices have risen in the wool market and, according to to-day's press they are about 20 per cent, higher in Brisbane than they were at the start of the season. We have been able also to sell a bumper wheat harvest to both Communist and non-Communist countries. Every member of the Country Party has literally licked his chops when he has heard the news of the sale of more wheat to China, and most of the reactionary members of the Liberal Party have either deplored the sales or remained silent. By and large, our exports are not likely to be much down on last year and, at about £900,000,000, say, they will be the third best of the past decade. This, then, happens in a year in which we should be adding something to our reserves to make a cushion for the bad year. But what has happened? Our reserves, apart from borrowings from the World Bank, will be about £250,000,000 at the end of June, and perhaps £200,000,000 at the low point in September. That makes a loss of £300,000,000. If we add the World Bank borrowing to our reserves we may touch as low as £275,000,000- or £50,000,000 below our post-war low. That is the condition to which this Government has reduced the country even after it has successfully negotiated this loan with the World Bank, and after we have had a very good export year. Not only shall we be below our safe minimum; not only shall we not have enough to meet a drought; not only shall we have trenched on our second-line reserves; but we shall be committed to repay nearly £80,000,000 in the next three or four years to those from whom we have borrowed. So, on the international front the Government has gambled - repeat, gambled - and Australia has lost.

Our security has been drained away for the sake of doctrinaire orthodoxy. We must start again, the hard way, to build up our reserves to the point that will give us freedom of action in an unsympathetic world. We cannot expect the world to be sympathetic to us when we are considered as one of the rich nations. Of course, the Government expects that other countries should make resources available to us for our further development while the underprivileged countries go without. In regard to internal policy and imports, in its statement of intentions to the International Bank for Reconstruction and Development, the Government, said -

The impact of the internal measures on imports has only recently begun to show.

I .think I have proved that the impact of internal measures on imports, if it has shown anything, has shown that imports are still flowing in and the Government's policy has not -affected 'the position one iota. Unless the statement of the Treasurer to the Inter national Bank is based on information not made available to Parliament, it appears to have little factual basis.

As I said earlier, imports last month, at the time that the statement was prepared, were running at the highest daily rate yet recorded. I find it hard to believe that the Treasurer believed what he said. None of the declines in imports, in the few cases in which they occurred, can be attributed to the Government's internal measures. With regard to the major items, tractor sales in the December quarter were well up and current imports, even at the reduced level, are 50 per cent, above the level of 1958-59. Timber imports, at £4,000,000 for the March quarter, are only half the figure for the September quarter but are still at the 1958-59 rate. The facts about timber are well known - grossly excessive imports, terrific stock-piles, saw-mills closed down and Australians unemployed in at least four States because of the importation of timber. All this will continue until the stocks are used up. Imports are still at the 1958-59 rate, and none of this is due to internal measures. It is all due to excessive imports which provide, in part, their own cure at the expense of those least able to bear the burden.

The third major item imports of which fell was steel. Imports fell from £19,000,000 to £16,000,000 in the March quarter. This was the same rate as that for the September quarter and was nearly four times as great as the 1958-59 rate. Imports have been even more grossly excessive for steel than for timber. During the last nine months, imports have come in at the rate of 100,000 tons a month compared with a local production of 300,000 tons a month. This was not due to a rise in local demand but to speculative stock-piling which the Government did nothing to prevent.

Now, Stewarts and Lloyds, the pipe subsidiary of the Broken Hill Proprietary Company Limited, has had to put men off until excess stocks are used up and has given dismissal notices to at least 400 men. Similar action by John Lysaght (Australia) Proprietary Limited, the steel sheet makers at Port Kembla, was announced this morning. Many sections of the Broken Hill Proprietary Company Limited itself will doubtless do the same unless exports and reexports can be hurriedly arranged. The two industries which have been directly hit by internal measures are housing and motor vehicles. Therefore, I want to say something on the question of housing. Few imports are directly related to housing, but the difficulties of the timber industry, already created by excess imports, will be aggravated by the decline in housing.

Motor vehicles have been directly and hard hit by internal measures, both by the fly-by-night sales tax increase and by the hire-purchase restrictions. But imports of motor vehicle components in the March quarter were a record at £26,000,000. This is more than 50 per cent, above the 1959 figure despite the fact that registrations, even during last year's boom, rose by only 15 per cent, and now, of course, they are well blow the level of 1959. So much for the claim that internal measures are beginning to affect imports.

The imports which are dropping are dropping because of grossly excessive imports in the immediate past. The industries which have been heaviest hit by internal measures are still importing as much as ever. The doctrinaire dream world of the Treasurer has taken charge. He says that the policies are working only because the theory says that they will work. There is no decline in imports of any economic significance and our international reserves are gone or committed. Let me turn again to the statement of intentions. I quote the Treasurer -

In present circumstances, the Government attaches particular importance to the objective of bringing the fall in reserves to a halt.

A noble sentiment! It is a relief to the more responsible members of this House - all of whom sit behind me, of course - and to the community that the Government has at last realized that its reckless course must be halted. It would, perhaps, be ungracious to suggest that this awakening has come only when the Government has discovered that Australia's pocket is empty and no other course is open to it. It is hardly a virtue in a man who has spent all he has to say, " I attach particular importance to spending no more". But this Government still does not realize that its Docket is empty. It says that it will continue with the same policies that it was following while the money was running out. This is the policy, according to the Treasurer-

Since early 1960, the economic policy of the Government has been directed to reducing the excessive rate of increase in demand and to arresting the rise in costs and prices.

Thus, something was to be reduced and something was to be arrested. Let us look, first, at the thing that was to be reduced - the excessive rate of increase in demand. This means nothing more than that demand was to be reduced. But a reduction in demand sounds quite innocuous to those who do not understand the jargon of orthodox economics - the sort of economics that this Government prides itself on practising. Reduction in demand means, to the Labour Party, unemployment, unused machinery in factories, a cut in sales, bankruptcy for many small businesses and a pool of unemployed. These things were to be brought about by a flood of imports, by higher taxes, and by a cut in loans from banks and other sources. These results have been achieved by the Government.

We have had the flood of imports and, just as planned, it is making men unemployed, machines idle and small businesses bankrupt. But this measure has proved to be a Frankenstein. The measure is out of control. Australia can no longer afford to pay for its imports. So it has now become the Government's first policy objective to destroy the very thing which it introduced to create unemployment. But it has thought of no new measures. It is now going to have still higher taxes, still greater cuts in loans and continued high interest. It also now admits that it recently attempted to persuade the Commonwealth Conciliation and Arbitration Commission not to increase wages "for the second year in succession, despite the great rise in the cost of living which has occurred in the last two years. It regarded that as one of the virtues that it might put before the International Bank to secure a loan.

It also said that it intended to maintain credit restrictions until June, 1962. There was a touch of arrogance about that. It presumed that it would be in office until 1962. It said, in effect, " We will have an election, but we will be back to do those things that are bearing so heavily on *he

Australian people". Let me tell the Government that the people of Australia will not return it at the next general election. When Labour takes office, early in 1961, we will re-impose selective import restrictions and we will ease credit, no matter what undertakings the Government has given to the International Bank. We have had the credit squeeze, the balanced budget, and the cut in real wages for fifteen months now. With all of them still operating, imports are the highest ever. With all of them still operating, most of the unemployment can be traced to imports and not to internal measures. If they are going to be used as the sole means to create the unemployment pool and the idle machine capacity pool we have seen nothing yet of what a credit squeeze really is. We are really going to see some unemployment in this country this winter, and nobody wants to see it. I wanted to speak about high interest rates and housing, because this is one of the internal measures which I would have liked to deal with in detail, but I find that in the time left to me all I can say to the Government is that the people of Australia do not stand behind its measures and the commitments it has given. The people of Australia will not allow this country to be thrown to the international wolves.

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