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Thursday, 10 March 1966


Mr Kevin Cairns (LILLEY, QUEENSLAND) . - Mr. Deputy Speaker, I think it is always a delight to follow the honorable member for Grayndler (Mr. Daly) in a debate. He has been participating in debates in this chamber for well over 20 years, but only recently I heard a friendly comment about his debating activities in the 1930's before he became a member of this House. Even then, he was accustomed to debating various issues. It was said that he could not make the debating team because he used to wave his arms about too much. I believe that in that respect he has not changed his habits over the years.

I now turn to the report of the Committee of Economic Inquiry, which is generally known as the Vernon Committee. A few things need to be said about this report, not only because of its virtues, which are considerable, but also because of its failure to analyse certain things. A little later, I want to make something of the fact that the Committee neglected to look beyond 1975. That will be a rather critical year, as I shall show. Since the report was presented, many criticisms of it have been made throughout the country by learned academics and quite talented journalists. We have, of course, the example of Professor Arndt, who, through his writings and contributions to various issues of current affairs journals, has been trying to drum up considerable support for the report. But one has to be fair and say that the best commentaries published on the report undoubtedly have been those contained in the " Canberra Times ". Mr. Peter

Samuel, who is economics editor for the " Canberra Times ", wrote a most penetrating analysis of the report, of its value and its lack of value in certain fields. An article by Mr. Samuel in the latest edition of the "Australian Quarterly" pinpoints some of the deficiencies of the document, and I think one should dwell on some of those deficiencies.

Before doing so, however, I point out that the central attitude of the Government has been that it rejects the proposition for a committee or an advisory council on economic growth. This attitude has fallen under rather strong and trenchant criticism from front bench members of the Opposition and even from the Deputy Leader of the Opposition (Mr. Whitlam), who, on this occasion, happens to have agreed with them. They suggest that we should set up in Australia a body similar to the Economic Council of Canada. This proposition has been advanced time and time again, but nowhere do they analyse the circumstances under which the Economic Council of Canada was set up. When one analyses these circumstances, it is clear that they do not apply in Australia and to that extent one has to reject the idea of an advisory council or committee on economic growth.

In the latest edition of a very valuable journal called "Australian Economic Papers, June-December 1965 ", Mr. A. M. C. Waterman of the Australian National University has analysed the situation with respect to Canadian economic growth in the post-war years. This is the sort of situation that gave rise to the need for the development of the Economic Council of Canada and the sort of thing we in Australia have said we do not want to have. Mr. Waterman stated that in 1963 it was said in a criticism of the Canadian economy by Professor H. G. Johnson in "The Canadian Quandary: Economic Problems and Policies " -

First, I do not believe that " growth " has been Canada's major problem: instead I believe that the outstanding problem of the past five years has been mass unemployment. Secondly, I believe that the problem of mass unemployment has been seriously aggravated by perverse economic policies ineptly pursued by the Canadian economic policy makers.

Professor Johnson was able to write that early in 1963. In concluding his analysis of Canadian economic growth, in which he quoted Professor Johnson, Mr. Waterman stated -

It is hardly surprising that by 1962 the Cabinet's nerve was entirely shattered: the extraordinarily perverse handling of the exchange crisis and subsequent events serve only to illustrate the general proposition that a country gets the government it deserves.

I have given those quotations because they make clear the background to the circumstances that led to the setting up of the Economic Council of Canada. None of those circumstances has applied to Australia. Only now has Canada, rather belatedly, got her unemployment below the level of 5 per cent, of the work force. We in Australia have not approached that situation since the 1930's. So if one looks at Canada and relates the proposition in the Vernon report for an advisory council on economic growth to the Economic Council of Canada, one finds that very little real comparison can be made between the situations in the two countries.

We come now to the general criticisms that have been made by the honorable member for Yarra (Dr. J. F. Cairns) and the honorable member for Melbourne Ports (Mr. Crean). The honorable member for Yarra gave an interesting dissertation on some of the strategies of economic growth. He made the point that between 1931 and 1951 the problem was to get economic growth at almost any cost. We had to get growth. From 1951 onwards, he said, the problem has been one of allocation of resources within the economy in which we are getting economic growth. I agree with this. I would not disagree with it for one moment. But there are shortcomings in this sort of suggestion. He then quoted Mr. Garner Ackerley, Chairman of the Council of Economic Advisors to the President of the United States. Mr. Ackerley has said that the problem is to get allocation of resources within an economy which is going through economic growth. With all this we agree. We know that Mr. Ackerley has promoted this kind of solution to the problem of economic growth in the United States. Whether for reasons of justice or for reasons of pursuing economic growth at any cost, the problems of allocations of resources in the United States are very critical indeed. In the United States they have mass unemployment. They have a situation of poverty in which nearly 10 per cent, of the population have unemployment or under employment - I am referring to the Negro problem. Any attempt to relieve poverty so as to develop a great society, even if the re-employed men are nothing else than work force additions to the economy, has to produce economic growth.

So the problem of allocation of resources in the U.S.A. is related very clearly to a level of poverty in that country. This is the central problem of American economic growth. Eliminate some of the poverty and you will have economic growth, even if you have no growth in productivity at all and even if you have no increase in the capital backing for each worker. But that is not the situation in Australia. Here we have something like 6 to 7 per cent, of our households at a poverty level. Quite apart from the injustice of that situation, which is very considerable, the major problem is that the reallocation of resources would not produce economic growth here in the same way as Chairman Ackerley says it would in the United States. So the honorable member for Yarra, in equating our position with that of the United States, has not, I suggest, properly understood the situation.

My very good friend, the honorable member for Melbourne Ports, in his contribution made the veiled accusation, as he did in his speech on the Budget last year, that the Government is devoted to a wage fund theory of wages. His being able to talk of a wage fund theory indicates that he knows something about economic history, but we are concerned with the present situation. The argument that he hinted at in his speech last night and to which he referred explicitly in former speeches is that wages in Australia are low and that productivity per worker has been rising very slowly in Australia because there is insufficient capital backing per worker. The burden of his submissions to the Victorian Industrial Relations Forum late last year and on other occasions was that the way out of this dilemma is to increase wages. In his submission, if you increase wages productivity increases and so on.

I do not think it is logical at all to compare wages as a proportion of national income or national product and to say therefore one country is paying more wages than another or one country at different times of its history has paid higher wages than another. If one wants to accept the theory which lies behind the contributions of the honorable member for Melbourne Ports in this respect, and I respect him very highly, one then has to say that this Government has done more with respect to wages than previous Governments because wages have been a higher proportion of national income and net national income under the Menzies Government, and the Holt Government of some weeks, than it ever was under Labour governments. Therefore, one could argue that the increase in wages and productivity on account of this factor was as high as it could possibly be. I think the whole balance of reasoning here is fallacious. I should think that the honorable member for Melbourne Ports, in his more sober moments - I do not say that with any disrespect - or on reflection, might agree with that kind of proposition.

The report of the Vernon Committee is a very large document and one has the suspicion that some honorable members have not completely read it. I know that the honorable member for Parramatta (Mr. Bowen) is very proud of the fact that he has read every chapter of the report. The report basically divides economic growth into two sectors. There is the growth in the work force and there is the growth in productivity per worker. The Committee makes its projections up to the year 1975 upon a growth of the work force of about 2.7 per cent, per annum. It assumes that the rate of growth of productivity will be 2.3 per cent, per annum. I may be slightly out in my recollection of those figures. The Committee does not assume that productivity will rise and so it argues that with this situation we can achieve a rate of growth of about 5 per cent, per annum between now and the middle 1970's. But of the 2.7 per cent, per annum growth in the work force, which is obviously critical to the Committee's calculations, about 1.4 per cent, will be due to the natural population increase.

I mentioned that the year 1975 was critical for these calculations because from 1976 the rate of growth of our work force due to natural population increase will decline quite sharply. I am referring to the sustained, the real and the chronic decrease inthebirthrateatthepresentwhichsug- gest that this is the most chronic, persistent and dangerous economic and social problem that Australia will have to face. By the late 1970's we will not have a 1.4 per cent, addition to our work force from natural factors; it will be down to 1.1 or 1.0 per cent, and from all accounts the rate will continue to fall. So I suggest that the central problems that we will have to face are the need to keep a sustained and increased demand in the economy from a sustained increase, over the long term, of the work force and of a consuming force. Unless this problem is faced now, Australia will fall into serious trouble from the middle 1970's, and I know many honorable members on this side of the chamber intend to be still here on the Government benches in the middle 1970's. It is to be hoped that the Statistician, in assessing future increases in the work force, will not neglect these factors. The chronic problem which the United Kingdom has to face in trying to increase her rate of economic growth, which is nothing like ours, is the rate of growth of her work force, which is only about .4 per cent, per annum. The chronic problem which France faced for decades was a decrease in her work force and it was not until the work force started to increase in real terms that she began to have significantly higher rates of economic growth. I think we can benefit very clearly and in a very pertinent manner from the experiences of the older European nations in this respect.

There are one or two other matters upon which the report has not commented. The Committee has not dealt with the problems of determining short run fluctuations in the Australian economy. Australia has a number of regional economies. In my own State of Queensland there are five distinct regional economies which have violent seasonal fluctuations. A levelling out of these seasonal fluctuations would produce a real and sustained growth in the gross national product and in the Australian rate of growth. But the report does not deal at all with the problems of regional growth. It does not deal with the problems of cutting the bottom off short run declines in national product. I think honorable members realise that many more indicators will have to be constructed in order to deal with this situation. In the last pages of the report - as an addendum in a sense - the authors suggest a number of statistics that need to be gathered by the Statistician. Some will have to be gathered before we can deal with this problem. One would hope particularly that statistics relating to earnings drift in Australia will be compiled and evaluated without much delay. I regard them as extremely important.

One aspect of the economy with which the report has not dealt is, of course, the welfare aspect. It is anything but a bread and circuses report on the Australian economy. It does not deal even with welfare economics. But any attempt to deal with welfare economics which would cause in the long run a real and sustained increase in the Australian work force from the critical middle 1970's onwards would make a greater contribution to our long term growth than any changed engineering of the resources which this report attempts to achieve.







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