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Thursday, 10 March 1966

Mr DUTHIE (Wilmot) .- After two years of intense research and analysis, after 1,500 pages and the expenditure of £149,288 the Vernon Committee's report was finally produced in this Parliament on the night of 21st September last year by the then Prime Minister, Sir Robert Menzies. One can truthfully say that this report was rubbished by the then Prime Minister on the night that he introduced it. He rejected out of hand its main findings, its main advice and its principal suggestions. He gave the impression that the report would henceforth, as far as the Government was concerned, be buried very deep in the archives of this Parliament with the epitaph over it: " This was the Vernon report which died unwanted and unsung." I remarked at the time that the Prime Minister was playing the role of both gravedigger and undertaker of the Vernon report.

I wrote a poem at the time. It was entitled "Epitaph to the Vernon Report". I put my thoughts in eight verses which I have not time to read this afternoon. Five and a half months later we are debating this document. It is an anticlimax for all of us. We all feel today, and we felt last night, that we are speaking on something that is dead and gone, and that what we are saying is a kind of epilogue. I firmly believe that as far as the Government is concerned - I am being kind in this - the report has been buried, but its analyses and findings, its suggestions and comments no doubt will be read and studied by economists, university students and other interested people outside this Parliament for many years to come. We on this side of the House believe that it deserves a much better fate than has befallen it at the hands of the Government. A sum of £149,000 is a lot of money, and it was unfair and unjust to the Committee to treat so summarily the work of two solid years.

It is interesting to note that in criticising the report so high-handedly the then Prime Minister was at the same time criticising some of his top departmental officers. For instance, on the secretariat which prepared the basic research data and calculations for the Vernon Committee there were more than 20 Commonwealth officers. The largest contingent - five officers - came from the Prime Minister's Department. One of them had the second most senior position in the secretariat, being second only to the secretary himself, who was another very highly placed Commonwealth civil servant, with a distinguished academic background. In addition, the secretariat comprised three officers of the Commonwealth Treasury and two officers co-opted from the Reserve Bank. This is a formidable list of top line men. When the Prime Minister rubbished this report as he did that night he, in effect, rubbished those 20 men who worked so assiduously in the preparation of this most important document.

The then Prime Minister decided to set up the Committee in October 1962. Its conception was due to the aftermath of the 1961 economic recessions. The Government was jolted into doing something to offset the criticism which had been levelled at it. The Committee, therefore, was conceived as a gesture to the Government's numerous critics. It is interesting to note that the editorial in the " Canberra Times " of 22nd September last year said much the same thing as I have just said. Under the heading "Sir Robert v. The Technocrats" the editorial stated -

The Vernon inquiry into the economy was born early in 1963 under an ill start and expired in the House of Representatives last night under the surgical knife of the Prime Minister.

That is exactly what happened to it. The report was finally born and emerged into broad daylight in September of last year. The Government was immediately embar rassed by it; hence the Government's summary dismissal of its findings and advice. I suggest that this will be the last report on the economy to be sought by this Government because it started something which turned on it, and the Government does not like anything to turn on it. That is what this Government did with the stubborn truth contained in the report about the state of the economy and the ways in which to improve the economy.

It is so long since the report was before the Parliament that we need to remind ourselves of some of its contents. The report contains 1,500 pages, but it is only fair to have a quick look at some of the subjects it dealt with and some of the suggestions it contained. An interesting point is that the Committee's conclusions were based on a growth rate in the economy of 5 per cent, a year. To maintain a growth rate of 5 per cent, a year without excessive balance of payments problems or foreign domination, the Vernon Committee made certain recommendations. In the matter of planning - which, as we all know, the Government hates - the Committee suggested that the Government should set up an advisory committee on economic growth. The then Prime Minister shied clear of that suggestion very quickly. The Committee went on to say that the proposed advisory committee should be a small body composed of a chairman, two executive members and not more than ten part time members, all selected by the Government on the basis of qualifications rather than as the representatives of interested groups.

The report stated also that although the proposed committee would be required to report on specific topics, it should be independent and able to undertake work on its own initiative. It would also operate as an important forum of consultation between the Government and the private sector. That would be a very good move and we on this side of the House would support it. The report rejected the idea of detailed target planning for individual industries but it suggested that the Government should evolve policies directed at long term rates of growth for the economy as a whole and that these should be made public.

The Committee then went on to deal with investment. It suggested that overseas investment in Australia should not go beyond £150 million a year unless there was some form of direction and control. I point out that during the last twelve months more than £250 million has come into Australia in foreign investment. This is £100 million above the limit suggested by the Vernon Committee at which some controls should be applied. The Committee went on to say that the formal approval which the Reserve Bank gives to non-sterling foreign investment should be extended to the sterling bloc to aid potential control of overseas investment. Takeovers of Australian enterprises by foreign companies should be approved by the Government - that is quite a revolutionary suggestion - and the Reserve Bank should maintain a register of all overseas investment. That is not done at present.

I believe that the Committee advanced two very good suggestions in relation to investment. It suggested that if potential overseas investment appears to be significantly beyond £150 million a year selective controls should be used. That is something else that the Government is not doing in relation to overseas investment in Australia. The Committee then went on to deal with money. It said that the Reserve Bank should acquire more control over non banking financial institutions, even if this requires further legislation. The Committee no doubt had in mind the fringe banking organisations in Australia which today are playing - uncontrolled. I point out - a major role in the economy. Hire purchase companies would be one sector to which the Committee was referring. It believed that the Commonwealth should take steps to make fiscal policy more flexible to overcome deficiencies in monetary policies. It should also set up credit facilities for long term finance of capital goods exports.

Migration is another matter to which the Committee turned its attention. It recommended a target for net immigration of 100,000 a year. The search for oil was considered and the Committee decided that oil leases are at present too large and the covenants too light. When dealing with minerals the Committee suggested that Government mapping and geological surveys should be stepped up and that rewards should be given where exploration leads to discoveries which cannot be exploited immediately. It suggested also the setting up of a special projects commission by the Federal Government, for development, to advise on new concessions and to help overcome a lack of co-ordination between State and Federal Governments. These are worthwhile, sensible and practical suggestions but everyone of them has been torpedoed by the Government.

The Committee then dealt with productivity and with primary and secondary industry. It stated that grants or loans should be given to high cost farmers to move out of the industry. Dairying is specifically mentioned in this context. Honorable members will remember that a committee which was set up a few years ago to inquire into the dairy industry found that there were 3,000 uneconomic dairy farms in Australia and suggested that these should be gradually eliminated by the present owners being bought out either by the Government or by neighbours. The Vernon Committee, as I have indicated, also referred to uneconomic dairy farms. We on this side of the House do not agree with such a drastic solution to the problem. The Committee then went on to mention costs and savings. The matters to which I have referred were considered by the Vernon Committee when it was trying to find ways and means of keeping the growth rate at 5 per cent, a year without excessive balance of payments problems arising. The report is a most intricate one and has been prepared very carefully.

I wish now to refer to comments on it by one or two men who ought to know something about it - 'more than any of us know about it. As reported in the " Age " on 7th October of last year, Professor Arndt criticised the Prime Minister for his deplorable and unprecedented attack on this report.

Mr Griffiths - The present Prime Minister?

Mr DUTHIE - No, the then Prime Minister, Sir Robert Menzies. The newspaper report stated -

Professor Arndt, head of the department of economics at the Australian National University, said the Vernon report compared favorably with many similar documents produced in other countries.

It stated that Professor Arndt had spoken of the Prime Minister's violent attack on the authors. It also stated, referring to Professor Arndt again -

He said Sir James Vernon's committee deserved praise for three reasons: - lt had succeeded "to a remarkable extent " in expressing complex economic matters in language which laymen, "such as politicians", could understand;

It had also managed to incorporate in lay language much of the thinking about the Australian economy that had gone on in Australia in recent years;

The " good sense and moderation of almost all the policy suggestions " contained in the report. " In fact, to some perhaps more rabid people like me the suggestions sound almost cautious," Professor Arndt said.

The fact that many of the report's suggestions were in accordance with the views of the Deputy Prime Minister (Mr. McEwen) made the Prime Minister's handling of the report all the more remarkable.

We know that that is true. Members of the Country Party in this Parliament would agree with more of this report than would members of the Liberal Party. Here again we see the conflict of opinion between the two groups that make up this coalition Government.

Mr Fox - Has your party any conflicts of opinion?

Mr DUTHIE - We have a few, but they will be resolved in time. We are very patient people. In the " Canberra Times " of 24th September, Peter Samuel made this interesting comment -

If this report demonstrates anything, it is the need to get experts on to committees which are intended to provide expert advice. I am quite prepared to believe, though, that in this case the Government never really wanted advice in the first place, and that it simply wanted something launched so it could counter charges of complacency about the quality of its economic policymaking . . .

The terms of reference of this Committee included almost every economic policy topic under the sun except those most closely related to this short-term problem.

He also made this interesting point -

What of the Advisory Council on Economic Growth which the Prime Minister "unhesitatingly rejected"? Here Sir Robert's argument is really feeble. He claimed that the establishment of the Council would involve handing over power to outside bodies and lavishly talked of a technocracy taking over from democracy.

Now the report deliberately made the point that the Council should be advisory and provide purely economic advice. Yet the then Prime Minister claimed that this Advisory Council would take over the government of the country. That was a stupid and ridiculous criticism of what the Committee had in mind. Sir John Crawford cleared this matter up when he answered the Prime Minister. He had the courage to do that. He said -

Far from favouring the idea of a technocratic society, the committee dismissed as undesirable the setting up of a formal planning body of the type operating in several countries.

Nor did it favour the assignment of target growth rates to sectors of industry, although it considered industry needs some lead as to the general Tate of growth thought feasible by the Government.

The committee fully realised the final responsibility of Government in a democracy and had no wish to change the established relationship between government and the authorities set up by executive action or Parliament.

The Government's disposal of the advisory council suggestion, however, did not dispose of the need for more independent, non-government economic analysis. 1 want to comment on that. 1 believe that a government can be too close to the economic problems of the day; in other words, it can be too introspective and too cluttered up with details, so that it cannot see the wood for the trees. That is inevitable in modern democratic government, when so many factors, trends, stresses and strains are, as it were, battering on the doors of the government's offices day after day. In my opinion there is a need for an objective approach to economic trends, strains and stresses by an independent, nongovernmental economic committee which feeds its findings to the Government regularly - monthly, if you like. In this modern age of fast moving affairs and events, we need a committee looking at the economy free from frustrating attention to the day to day tasks of administration. That is the sort of committee that the Vernon Committee had in mind - not a large one, as I mentioned at the beginning of my speech, but one equipped with men with qualifications in this field. I believe that such a committee would have a real job to do and could give the government a lot of advice - but not instructions - in relation to the strains and stresses of the economy by looking at it from a distance rather than in a close, day by day way, as a government is inclined to do.

Mr. Gatesof the University of Sydney made some good comments on this report, too. He said -

The Vernon Committee was born of uneasiness at the hand-to-mouth nature of Australian economic policy. The minor disaster of 1960-61 and the subsequent slowness of recovery showed the need for intelligent anticipation and long-term guide lines . . .

The Vernon Report ... is notable for four things:

Giving content to an otherwise platitudinous recitation of goals such as growth, rising living standards and economic stability;

Looking ahead and trying to assess the kind of performance that we can reasonably expect of the Australian economy;

Studying in great detail what this expectation implies for the economic variables which are subject to Government influence;

Recommending that the work of the committee should become a continuous exercise.

He also said -

Policy decisions are the responsibility of the Government, but policy formation is ultimately a matter for the widest possible public discussion.

He backed up the other men from whose statements I have quoted on the matter of the Advisory Council on Economic Growth.

We members of the Opposition say that this report has been treated shamefully. It can be a guide to a government that really wants to give permanent answers to some of the great economic problems of our time. One of the great weaknesses of this country is the limitation of the powers of the Commonwealth Parliament and Commonwealth Government under the Constitution. When we get right down to bedrock, we find that many of the fine suggestions made by the Vernon Committee cannot be fully implemented because the Commonwealth has not the power to implement them. That is a tragedy in this modern age.

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