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Wednesday, 9 March 1966


Mr McMAHON - AH those recommendations had great practical significance - immediate significance. Potentially they involved such measures as a ceiling on immigration at recent levels, a ceiling on new private capital inflow, selective controls on overseas investment, and a full-scale inquiry into the credit system. To leave undeclared the attitude of the Government on matters such as these could have caused great uncertainty. The public had a right to know where we stood on them and to know there and then. Had we not declared our attitudes I am sure there would have been the strongest demand that we should do so promptly.

Let me now turn to some of those aspects of the Committee's report with which the Government has not felt able to agree. The first is that of immigration. I look with pride on Australia's achievement on immigration through the postwar period and in doing so may I say once again that I give the greatest credit to the vision displayed in this field by the honorable gentleman who now leads the Opposition. It would surprise me to hear one voice raised within this House against that policy today. What is the essence of this question? It is that we have a stupendous task in hand in this country and that we do not necessarily have unlimited time in which to carry out that task. The prospects for the growth in our native-born work force are reasonably good but necessarily limited. Over the next decade or so we might hope to add to the work force from that source at a rate of perhaps 1.4 per cent, per annum. But if we are to build our nation at the speed for which 1 know we all hope, we shall need a great many extra hands and, increasingly, it becomes less certain that we will always be able to command them. The fact is that people and labour of the kind that suits us are coming more and more into demand throughout the world and there are already competing pressures upon our own sources of supply. We must take them as and when we can get them and I am sure it would be most unwise, in these circumstances, to rein back unnecessarily the level of net immigration to some artificially selected figure, such as the 100,000 per annum which the Committee suggested we should not exceed until the late 1960's or early 1970*s. I am of course alive to the implications of such a view. Some of them were stated by the Committee, though I cannot but feel that its views overrate the disadvantages and underrate the offsetting benefits, even from an economic viewpoint, which a high and increasing level of immigration brings in its train. Even, however, if the Committee's view were entirely correct from this narrow economic angle, the fact is that governments cannot look at such matters as this only through economic spectacles. We do not propose to do so.

I turn now to one of the reasons which the Committee advanced to support its views on the proper immigration policy for the Government to adopt. It is that, because of a rapidly growing work force, the level of investment in fixed capital, both private and public, within the economy will have to rise over the decade ahead. On the basis of its calculations the Committee pointed out, in varying places throughout its report, that the level of fixed investment would need to increase from the 1962-63 figure, which it put at 24.S per cent, of gross national product, to a figure of 25.9 per cent, of gross national product by the year 1974-75. Even if the Committee's figuring were accepted - and there are reasons for regarding it as open to doubt - I should not, even so, have found it highly compelling. If the price of building up our work force at the pace which an increasing level of immigration could provide were to be some sacrifice in terms of current living standards, I do not have much doubt that most Australians would think the purpose worthy of the sacrifice. How, after all, was this country built up except through sacrifice? Is it to be suggested that, because some sacrifice is entailed, the Government and the people for whom it speaks should shy away from it?

Tn point of fact, the Government and the people of Australia have already rejected such a course. The Committee, as I have said, put the necessary rate of fixed capital investment at 25.9 per cent, of gross national product by 1 974-75. May I draw the attention of the House to the fact that last year, 1965, the actual figure was already no less than 26.8 per cent.? Sir, it is a matter of common knowledge that, defence expenditure apart, there are no two areas of expenditure which have recently been rising faster within the economy as a whole than private fixed investment on the one hand and public authority investment on the other.

I am led next to consider the views taken by the Committee on the role of overseas capital in our economy. It acknowledged that such capital can bring many benefits to Australia but feared an excessive growth of overseas ownership of Australian industry and an excessive bill for earnings payable abroad. So it suggested a ceiling on new capital inflow and the possible need for selective control on such investment. Much of the argument rested on certain calculations as to the growth of income payable abroad to foreign investors. The ex-Prime Minister has, of course, already had something to say about the calculations made by the Committee in its projections of investment income payable abroad and of the growth of foreign ownership of Australian company assets. Figures recently published by the Commonwealth Statistician regarding investment income payable abroad in 1964-65 confirm and, if anything, strengthen the points made by Sir Robert Menzies at that time. Indeed, what he had to say has) I think, been for the most part accepted in subsequent discussions and I do not propose to cover the ground again.

In any discussion of overseas investment there is, I think, a useful analogy to be drawn with what I have just been saying about immigration. Just as, in order the more effectively to develop this country within a reasonable time, we find it necessary to supplement our work force by bringing new people to the task from overseas, so we must accept that, if the economy is to grow at the pace we want to see, we must take in overseas capital - at any rate within any limits that seem feasible. I said earlier that labour becomes increasingly scarce. If anything, capital available for investment internationally is probably even scarcer and, by the look of things, may well become more so. It is, I think, too seldom realised that, within recent years, there has been onlyone net exporter of private long term capital in significant proportions in the world - that is, of course, the United States of America. Even the United Kingdom, to which we ourselves have looked for a great and valuable proportion of our own capital imports, has itself been a considerable importer of private capital of recent years, with the result that the trend of its net private capital exports has been downwards.

We will, I hope, have an opportunity on some later occasion to debate this whole question at much greater length than is possible now. Suffice it to say that, although the actions already taken by the United States of America and the United Kingdom in this field do not appear so far to have greatly affected the entry of new capital into Australia, we cannot necessarily assume that this will always be so. But, for the reasons I have already stated, our problem in building this great country seems likely to be less one of worrying about the particular issues that arise from some aspects of overseas investment than of getting our hands on enough capital, overseas or from our domestic savings, to do the job we have before us in the time open to us.

The Government has of course a lively sense of the drawbacks that go with overseas capital, especially some forms of it. In the broad we think these are greatly outweighed by the advantages and we are up against the fact that whereas we are bound to need more overseas capital, there is increasing world competition for a supply that may itself be diminishing. As to some of the drawbacks which can be associated with it, this is a matter of working out, mainly by the exercise of good sense on both sides, satisfactory relationships as between overseas investors and ourselves. They have something to gain in this country and something to contribute. We likewise have something to gain and a cost to meet. I do not think we have anything to gain by resort to the device of arbitrary ceilings and arbitrary controls.

Our overseas balance of payments is of course very much involved in this question and it is in this area that I find the Committee's report most disappointing, lt presents what I think is an unwarrantably gloomy picture. In part this stems from the Committee's exaggerated views regarding the likely growth of investment income payable abroad. In large part it stems also from what can only be described as a despondent view of export prospects. In the field of mineral exports particularly the Committee seems to have written our prospects down beyond anything the known facts could justify. For 1974-75 it projected, on the basis of some detailed examination of prospects, exports of some $330 million. Sir Harold Raggatt, who may be allowed to know something about these matters, some time ago publicly suggested that by 1975 a figure of $600 million for mineral exports seems wholly reasonable. A more recent forecast in the Treasury publication " The Australian Balance of Payments " suggested that mineral exports could rise to a figure well above $600 million by the mid 1970s.

Again, as to rural exports, even if we do no more than continue the postwar trend, ignoring for that purpose any short and medium term effects of the current drought conditions, we reach a figure for 1974-75 considerably greater than that of $2,350 million fixed upon by the Committee. Simple calculations of this kind are not, of course, in any way conclusive; if anything, we can say the trend in the volume of rural exports over the past decade or so has been more strongly upward than the trend over the postwar period as a whole.

For my own part, I would be the first to say that we cannot possibly foretell the future for exports, or indeed for much else in a growing and changing economy, with any real precision 10 years hence. The Treasury paper I have referred to points this out very clearly, I think. The point is, of course, that if long term projections are to rest only upon what one knows today, they are almost bound to be wrong. The whole essence of making long term projections, I suggest, lies in the reasonableness or otherwise of the allowances that are made for those matters one does not know about. These can go against us; but they can also go in our favour. Again I fail to see why we should necessarily lean to pessimism.

I have already said that I view with much scepticism the possibilities of mapping out, with any useful degree of precision, the future 10 years, or even less far, ahead. Accordingly, I do not accept the importance which the Committee appears to attach to the setting of specific growth rates for the economy as a whole. Still less for individual sectors or industries thereof. The then Prime Minister, in his election policy speech of 1963, stated the Government's expectation that over the five years from 30th June 1963 the gross national product as measured at constant prices would grow by some 25 per cent. That, for the benefit of honorable members who, like myself, find some difficulty with compound interest, means an average rate over the five-year period of nearly 4.6 per cent, per annum. The Committee, as is well known, suggested the adoption of a target rate of 5 per cent, per annum which, it said, would be a high rate but one not impossible of attainment.

It has been suggested that there is really very little difference between the Committee's approach and that stated by the then Prime Minister. That is far from true. The Committee suggests the setting up of a target towards the achievement of which the main branches of economic activity would be guided. Sir Robert Menzies, by contrast, stated it as the Government's reasonable expectation, given good government, that growth equivalent to an average rate of 4.6 per cent, per annum would in fact take place- He did not, that is to say, set up this figure and make its achievement a dominating object of policy. It was seen rather as a result which could be expected to emerge from the efficient utilisation of our resources and capacities in response to the normal forces of demand. There was no thought behind it of governmental direction or even persuasion to warp the natural development of the economy in one direction rather than in others.

I see danger in adopting the alternative and what I may call the mechanical approach to this question in that, as soon as one begins to set tip statistics of gross national product at constant prices as a bench mark for policy, one opens the door to figure mongering which may be at best misleading and at worst a good deal more than that. The reasons for that comment are, in large part, technical and I do not wish to detail them here. Suffice it to say, by way of illustration, that merely because of the way in which these things are measured by the national income statisticians, growth in output in the socalled tertiary industries - which include building and construction, transport and communication and various other highly important activities - shows up less favourably than growth in industries, such as manufacturing, in which increases in productivity lend themselves more readily to precise measurement. But, judged by the experience of those few countries in the world, such as the United States, which enjoy a higher real income per head than Australia, our needs and wants seem increasingly likely to be directed towards the products and services provided by the tertiary industries. It is, in other words, a matter of experience that what people in Australia are demanding and what the current phase of our development requires is not simply more or better motor cars, refrigerators, or products of 'that kind - desirable though they all are - as much as more and better housing, schools and hospitals, larger and more efficient transport and communications facilities and so on.

Lest there be any misunderstanding, manufacturing is of vast importance and, as the then Prime Minister said, ours is a protectionist government which will always see to it that manufacturers get a fair go - even, perhaps, a shade better than a fair go. It is, rather, that I state a faith - the faith that the interests of the nation as a whole are likely to be best served if the pattern of economic activity is able to adapt itself freely to the changing pattern of national and individual demands. Having said this, however, I nevertheless reject emphatically any idea that the Government is opposed to planning in any useful sense of that term.

The Government does plan wherever, within the limits of its constitutional powers within a Federal system, planning is feasible and can lead to useful results. Doubtless it could do so to an increasing extent. What the Government is not prepared to do is plan for the sake of planning, which so often leads to plans being imposed on sectors of activity which do not lend themselves to it. We will not allow planning to become a fetish with us or try to extend it beyond its practical and useful limits.

We believe that, without committing ourselves to an overall plan, with all its restrictive and bureaucratic overtones and all the doubts as to its statistical foundations, it is still possible to have a firm, coherent and yet flexible economic policy which will serve our national needs; indeed, serve them better than an elaborate overall plan could. That policy is set within our clear objectives of full employment, increasing productivity, rising standards of living, external viability and stability of costs and prices. Much that the Government is doing is of course directed specifically towards the achievement of those objectives. I may quote as examples our immigration programme, our encouragement of exports and our persistent widespread drive to enlarge export markets, our strong support of public works programmes and our large array of special developmental projects, our massive assistance for roads in general, our support for housing, our large and growing contributions for universities and now for technical training, our very large and varied list of subsidies and tax concessions to encourage particular industries, and our fast growing research and advisory services.

There is a positive quality about all these measures, and a consistency. They form a pattern, a constantly changing and enlarging pattern, but one that hangs together and in which each element contributes towards the main objectives. Co-ordination takes place at the level of the Government itself, assisted by the higher departmental machinery for advising the Government. lt remains for me to add a few comments on the suggestion by the Committee for a continuing Advisory Council on Economic Growth, which, as it appeared to me, occupied a pivotal position in the Committee's general scheme of policy prescriptions. The Committee did not spell out the precise form this organisation should take, but it was to be broadly patterned on the Economic Council of Canada, though with less detailed terms of reference. On that basis it was to be formally established under an Act of Parliament which would confer on it statutory functions and powers. It was te have all necessary freedom as to how it pursued its activities within its terms of reference, on which, no doubt, it would, within limits, place its own interpretations. It would consult with such bodies and groups as it thought necessary, including Government departments and instrumentalities. We may suppose that it would have called fairly heavily on the latter for information and other forms of assistance.

It was to have, above all, extensive powers to publish its views and conclusions. It was to have a strong secretariat, probably drawn in part from the Public Service but also from the universities and elsewhere. Tie secretariat in its turn was to have the right to publish papers on subjects chosen by itself without necessarily getting the approval of the Council. The Council was to concern itself primarily with medium to long term trends and problems but it was also to report each year on what was described as the growth experience of the economy.

In practice that could mean only one thing. The Council would report on the performance of the economy over the past year or so; but, since policy measures are necessarily an element in any economic situation, it would have been reporting - giving its views, that is - on any policy measures the Government had taken and on what their results appeared to be. Let us be quite clear as to what it was this Council was intended to do. It was to gather, collate and study economic information. It was to take the views of various people and organisations. It was to engage in analyses of economic trends. Up to this point it may seem to have been envisaged as little more than a research organisation with a right of publication. But it was to do more than this. It was to be an advisory body; that is to say, it was to have the role of recommending to the Government courses of action on economic matters - in other words, to frame and propose policies. There are several things to say about this. First of all, it would constitute a system of advice additional to our existing system of advice - the higher echelons of the Government Public Service. On that I can be brief. We have behind us men of ability, knowledge, qualifications and experience of an order most unlikely to be surpassed by any body of persons within Australia. It would also be additional to our existing system of consultations with industry, commerce, finance and trade unions. These are not only extensive; they are also, in an important sense, continuous. Literally, we are in everyday contact with people in these areas. They tell us their ideas. They put before us their problems, their difficulties, their criticisms, lt is wholly a myth that the Government works in a vacuum, remote from the real world and out of touch with it.

Besides this day to day contact, we have, of course, formally constituted bodies like the Manufacturing Industries Advisory Council and the Export Development Council, and, at least twice a year, consultations such as those recently concluded with representatives of industry, commerce, finance and the trade unions, who put before us and discuss with us their considered views on the trend of the economy and suggest measures that might be taken in relation to it. 1 do not say this system of consultation is necessarily perfect. It may well be capable of further development. But it has one important merit in my eyes; it provides for direct consultation. We meet and talk with the people actually concerned in business; we do not merely get their views as reported to us or filtered through some other body.

The other and still more serious objection is the one on which the then Prime Minister particularly dwelt. The proposed Council would make recommendations to the Government on courses of economic policy and it would also, as we understand it. publish its advice. Indeed, the Committee lays some stress on the importance of influencing public opinion in these matters. The Committee said that the Government would be free to accept or reject the advice of the Council - as indeed one would hope it would. If the Government accepted the advice, presumably all would be plain sailing. But it might well find good reason for rejecting it. lt might, for example, put a different interpretation on events and trends. After all, it would, with its permanent advisers, have gone over the same ground as the Council and have all the information the Council had, and probably more. Or it might frankly judge that the action recommended would not be acceptable to the public or sections of it - and that could be entirely a sound and proper judgment for it to make.

Such a situation could arise in two ways. First, the Council may have based its advice on strictly technical considerations. But as the then Prime Minister reminded the House, it is but rarely that a Government can take a decision on technical grounds alone. In economic matters, as much perhaps as in any others, all manner of considerations have to be brought in. Government in a democracy is, after all, the art of the possible. Secondly, and even more importantly, it would be naive to expect such a Council in all, or perhaps even most, cases to arrive at its views in this strictly technical way. Men of the status which would necessarily be involved have views on many matters, by no means all of them necessarily within their own experience. They would be most unlikely to hold themselves bound to formulate their advice purely on the basis of economics. They would on the contrary, be bound to seek to use the power which such a forum would give them to bring pressure to bear upon the Government to give effect to their own ideas of how the economy should be run and for whose benefit. There is, I think, little doubt about this. It is a fact of political life with which we are all familiar.

Were the Government, however, to reject the advice of the Council on any matter, it would have some explaining to do. lt would appear to be defying authoritative opinion. lt would be disowning the body it had created to assist it. It would offend people who had been influenced by the views of the Council. This is the coercive aspect of which the then Prime Minister spoke. In short, I do not think this notion of an independent Advisory Council, even if it were to work out as ideally as its proponents envisage, would offer net advantages over the system we have now - of technical advice given by competent, responsible permanent officials and of direct consultations with business.

I do not regard this system as beyond improvement, lt has evolved a long way but it can be developed further. There is need for wider economic studies, more forward looking studies, more studies in depth of particular problems and areas of activity. There is much room for extending and coordinating our contacts with the various sectors of the economy and the people who are working for their advancement. None of this, however, must be allowed to weaken the established relationships of an administrative service responsible to the Government, a Government responsible to Parliament and a Parliament responsible to the people.

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