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Thursday, 17 March 1966


Mr HAYDEN (Oxley) .- In the course of this debate I want to refer particularly to the report of the Vernon Committee. In doing so at this time I wish to complain about the way in which the business of this House has been conducted by Une Government. Until a few hours before we commenced business in this place on Tuesday of last week, after a recess, it was not possible to discover what business would be coming forward on that day or the order of business. Last Thursday evening I had hoped to be able to speak in the debate on the Vernon Committee report, but I found that the time allotted for the debate had run out. As there were no more Government supporters to put forward the Government case, members of the Opposition, several of whom were available, were not allowed an opportunity to speak to the report until this week in this debate. That is why I take this opportunity to comment on it. I feel that there is a strong obligation on the Opposition to discuss this report which is one of the most important reports that have been brought before the Parliament for many years. Although it is a tremendously voluminous report which cost more than $i million to compile and which contains some thousands of pages, we are expected to discuss it within 20 minutes.

I want to refer particularly to the former Prime Minister's violent attack on the planning proposals and projections of the Vernon Committee. His attack makes it clear that the battle lines over long-term economic policy have now been drawn. The whole world has accepted the desirability and urgent need for planned development and for guided growth. But Australia's reactionary head-in-the-sand leaders defy this trend. Backed by their Treasury " Yes " men, officials schooled in economic doctrines long since superseded, the Government's leaders have re-affirmed their faith in stability, in free enterprise and in muddling along in a mindless do-nothing about the long term. This is an approach that is making Australia a laughing stock among liberal thinkers everywhere. The philosophy behind the former Prime Minister's remarks on the Vernon report is an old one - as old as aggressive capitalism itself. Its nearest parallel is to be found in the terrible hatred for F. D. Roosevelt's New Deal on the part of American big business circles in the 1930's. The controllers of private industry were then captives of obsolete economic doctrines. They instinctively resisted the new diagnoses and new policies. Yet the New Deal advocates came to power with a clearer view than the professional administrators of how the United States Government might intervene to bring prosperity. But certain reactionary politicians have not learnt from this experience.

In 1965 we were presented with the ideas of an expert committee on how the Government could intervene in the economy to increase the growth rate and solve chronic economic problems. But the then Prime Minister is the real prisoner, in this day and age, of the most discredited economic doctrines at a time when the world economy urgently requires a new dynamism and rapid economic development in all countries. We should nevertheless welcome his statement. It was a rare statement of the Government's real intentions in the economic field - to sit back and to do no planning. Any statement, however odious, is better than the undisclosed and secret official economic tinkering of which the Treasury is the acknowledged master. Those of us who wondered how the then Prime Minister would treat the recommendations of the Vernon Committee need not have bothered. There is another document, a rarer statement, that had already let the Government's real attitude to planning, to a faster growth rate and to new economic ideas out of the bag. I refer to the Treasury White Paper on "The Australian Economy 1962 ". This is indeed a remarkable document. It contains a partisan account of the recent course of our economy, an account which reveals to a disturbing degree the extent to which certain Treasury officials will forsake objective analysis to please their Ministerial chiefs. Its analysis is at the level of a first year economics student. But this is not its most significant feature.

Its real importance is found in its last pages. In this relatively unpublished and unknown section is contained the first rounds of the ammunition supplied to the former Prime Minister for use on the Vernon Committee. We are therefore entitled to look closely at this arsenal of ideologically committed laissez faire dogmas. The White Paper said that forward thinking is - . . based upon certain assumptions as to how our economy prefers to organise itself and what the role of government in it is to be. Hitherto it has been, and still is, preponderantly a free enterprise economy ... the underlying presumption is that, given the right facilities and economic climate, private enterprise will advance growth further, and along lines more acceptable to the community, than any alternative system would.

What is completely lacking in this servile endorsement of the personal opinions of a few top Ministers, and in the former Prime Minister's statement on the Vernon report, is any recognition that forward thinking would gain in consistency and purposefulness if it were extended into a national economic plan. Nowhere do the nineteenth century ideologists of free enterprise even see that modern capitalism has much to gain from the more favorable economic climate that would result if the Government set itself and the nation a set of targets.

For the then Prime Minister to say that this would be incompatible with free enterprise and that no alternative to the present procedures of economic policy making would be acceptable to the community is a monstrous piece of question begging and a display of astonishing arrogance. He says " turn " and we all turn. Does he expect a modern industrial nation to conduct itself on this principle? Does he think his posturings in this matter have the support of modern private industry itself? The facts are otherwise. The intelligent sections of manufacturing industries and transport sections have been clamouring for industrial targets to be announced by the Government. It is now clear that Treasury officials were told - I repeat, told - to defend the

Menzies refusal to contemplate any form of overall economic planning. The Vernon Committee was set up to look at the needs of the economy after the bungling, stop-go policies pursued by these same Treasury officials prior to 1963. They have always hated the Vernon Committee. Its very existence was a monument to their bungling, a bungling that resulted mainly from the web of ideological nonsense about the evils of planning that they had spun for themselves. And now they have had their revenge.

In the months that elapsed between the Cabinet's receipt of the report of the Vernon Committee and the former Prime Minister's rubbishing of the report in this House, the Treasury was a virtual hive of activity. Various financial journalists and economists began to receive Treasury studies on topics highlighted in the Vernon report. Whispers started that the report's forecasting and projections were hopelessly wrong. The political and financial commentators were softened up for the torpedoes that were to follow when the Prime Minister was ready to push the button. I want to say about the behaviour of the Treasury in this matter that what was done in the backstabbing of the Vernon Committee represents a most extraordinary and audacious bid by Treasury to become the undisputed master of both long-term and short-term economic policy in Australia. The method used was to mount an intellectual attack on the arguments of the Vernon Committee and to feed it to everyone in journalism, in business and in the universities who would listen. The Treasury begins by attacking planning and forecasting. By pointing to alleged errors made by the Vernon Committee it seeks neatly to rubbish any effort to introduce more planning into the management of the Australian economy. What is involved here is a sleight of hand trick which aims to confuse two different processes under the one blanket term of " planning ". In fact, planning consists both of a set of analytical techniques and projects and the policies and actions used to implement chosen targets. By criticising the forecasts and projections of the Vernon Committee, the Treasury aims to throw doubt on all other aspects of the planning process.

There are, of course, pitfalls and difficulties involved in making long term projections. This is well known in the Planning Commission of Holland, France, Japan and India. But the economists and planners of those countries have never gone on to draw the conclusion that their achievements with economic growth have not been due to planning in the sense of mobilising efforts and policies and methods of implementation. By contrast, the Australian Treasury in its 1962 White Paper and its criticism of the Vernon Committee's report has done everything possible to ensure that just this conclusion is drawn. In its White Paper, the Treasury reached the height of absurdity when it said, in relation to planning, that what suits older, more mature economies may be quite wrong for an economy like ours which is still in a frontier stage of economic development. For years, reactionary economists have argued that planning is suited only to rapidly developing economies. But now that Holland, France, Scandinavia and the United Kingdom have planning commissions, suddenly the Government's advisers find that planning is suitable to them and not to younger, rapidly developing countries. How ridiculous this is. Many people have objected to the forms the planning has taken in the Union of Soviet Socialist Republics, Poland and other East European countries. They have objected to planning methods adopted in India, Ceylon and African countries. But no-one has ever maintained that, on the evidence, planning has had a cramping and restrictive effect on the economic development of those countries. The Australian Treasury's assessment of this matter is unique and reaches the height of absurdity.

What is the basis of the Treasury's attack on the Vernon Committee's report, both through the former Prime Minister's outburst and its various other channels? The main argument seems to be that every major suggestion for a change in policy or a change in the structure of the economy is accompanied by some reference to the projections set out in Appendix D and Appendix N of the report. If it can be shown that these projections contain errors, all the major criticism and recommendations fall to the ground. Secondly, the Vernon Committee is accused of desiring a target growth rate of 5 per cent, in the gross national product, something that the Governor of the Reserve Bank has been advocating for more than five years. TheTreasury argues that in urging this the Vernon Committee is following a statistical illusion - that it will bring about changes only in the particular items that make up the gross national product at a particular point of time. The Treasury arsenal' then provides a minute criticism of specific projections of the Vernon Committee. It says that the rate of growth of the labour force is slowing down and not, as the Committee suggests, tending to accelerate. It says that the whole notion of a likely balance of payment prices in a decade is completely wrong headed. To back this, the Vernon Committee is accused of understating likely mineral export earnings by at least a third. It is accused of guessing the likely trend in manufacturing exports and of guessingwrongly. It is accused of assuming that the rate of earning on foreign capital will be 8 per cent., involving an outflow of foreign exchange averaging £212 million a year. The Treasury says that on recent experience the figures should be 6 per cent, and £160 million respectively, concluding that trends in foreign capital inflow do not justify the concern that the Vernon Committee has expressed on this matter.

I will concede that on these various matters about projections there is room for considerable and genuine disagreement. A number of economists have said that the Vernon Committee's remarks on foreign capital are more realistic than the Treasury's estimates, since the Treasury figures refer to the past five years which include two years of serious recession. Therefore, the Treasury's ideas on likely earning rates on foreign capital may be too conservative. The former Prime Minister made great play of the 6 per cent, rather than the 8 per cent, in his attempts to destroy the Vernon Committee's report. His dogmatism on this matter is not, however, shared by the Australian Labour Party nor by a large section of the economists and financial journalists of Australia.

All this shows the futility of the approach adopted by the Government to discredit the Vernon Committee's report. There is room for genuine disagreement with any forecast and projections. There can be no question of the former Prime Minister being completely right and the Vernon Committee completely wrong. Doubtless there is some truth in the extraordinary detailed criticism made by the Treasury of particular projections in the Vernon Comittee's report. But the usefulness of this detailed criticism depends largely on a consideration of the motives, of the Vernon Committee in making the projections and of the way in which they were limited and constrained in their investigation. If we imagine, as I believe to be the case, that the Vernon Committee relied largely on its common sense and a broad approach, much of the very detailed attacks on its projections are less significant.

What the Committee seems to be saying is not that each trend will definitely change by a definite rate or amount. Rather, the Committee describes the broad pattern and structure of the Australian economy and then says that, if we want to get away from this, we will probably need to take certain courses of action and change certain priorities. Tt is also important to note that because of limitations on its terms of reference the Vernon Committee was not able to do what the National Economic Development Council in Britain did - that is, to choose a growth rate for the United Kingdom economy and then spend most of its work in seeing how this could be achieved. Consequently, there is something of a confusion in the report between two separate things - a growth rate set as a target rate, and a growth rate that is likely to be achieved. This confusion is understandable when intelligent and tough minded men like Sir John Crawford are put on to an expert committee and then hamstrung by a Government directive that it does not want to hear about certain things that are actually crucial to the whole project.

The Opposition does not endorse everything in the Vernon Committee's report. The report is the work of conservatives, of businessmen and friends of the Government. It avoids all comment on capitalism as a just and efficient system. It omits completely problems of improving the distribution of income. It is silent on taxation and fiscal policy generally. Its sections on the causes of price rises are sketchy and bolstered by the untrue argument that we have been putting too big a strain on the economy when in fact, as shown by successive reports of the Department of Trade and Industry, productive capacity has been almost continuously under-employed. The section of the report on wage policy is a shocker. It contains a theory of inflation that would not do credit to the most immature student. Its recommendations on wage policy exclude cost of living adjustments of any kind. If we are to deal with these recommendations, then, according to a recent study by Professor E. A. Russell, the implementation of a wage policy of the kind advocated in the Vernon Committee's report would have led to a fall in the share of wages in national income from 60.5 pet cent, to 46.4 per cent, over the period from 1945 to 1964. But we believe that the report does show what can be done and reveals the value of having a real programme whose elements are clarified and made consistent with one another.

The most democratic and efficient way for this work to be continued and to become part of the political and economic life of Australia is for the Government to contain a Ministry of Economic Affairs to study and recommend policies about long term planning and management of the economy. I was opposed to the workings of the British National Economic Development Council when it became clear that it was acting as a bargaining area for an incomes policy as much as it was acting as a planning authority. The British Government quite rightly moved away from " Neddy " to a full planning ministry. The best arrangements in Australia would be for the restrictive and conservative Treasury to stay out of planning and to stick to short term management and the preparation of budgets. The long term projections on fixed investment, inter-sectional relationship in the economy and other planning problems should be done by a Ministry of Economic Affairs. This body should make the technical studies and take the decisions. This would be the democratic way. The Minister concerned would be responsible to Parliament and ultimately to the electorate. He could be questioned and he would be held responsible for plans. There would then be less suspicion of the motives and self interest of members of the planning authority, a suspicion, I confess, that must inevitably arise with an outside national economic advisory council.

The former Prime Minister's criticism of the Vernon Committee's report should not distract attention from the fact that fundamental questions were not asked in the report. No-one asked whether production for profit rather than social use perverts our society and our personal lives. There was no serious discussion of the way in which our productive capacity can be systematically expanded without causing serious inequalities in the distribution of income. Progress was seen as a process of movements in various economic indicators, and no-one on the Vernon Committee dared to ask whether progress had become a mad rush to satisfy artificial appetites, stimulated by advertising techniques which appeal to envy, snobbery and a sense of inferiority. The report has a message of hope - that more can be done with social investments out of the higher wealth that would result from planning. But it did not, and could not, say anything about the ordering of Australian social priorities. After all, the Liberal Party in office is the public mask of property and of an almost unchecked rampage of the profit motive. Its task is to beguile the voters and to suggest that capitalism now wears a benevolent smile. But sometimes the mask drops, and before it can be slipped on again we have caught a glimpse of the hard face behind it. On this occasion a petulant Prime Minister attacked the Vernon Committee in a way that was bound to be embarrassing even to other Government members.







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