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Thursday, 31 March 1966

Mr CREAN (Melbourne Ports) . - The Treasurer (Mr. McMahon) was kind enough to give me a copy of his paper before dinner. I thank him for the courtesy that he extended to me. However, I expected that in his speech this evening he would attempt to assure and soothe the electors of Kooyong. I thought that tonight we were to hear something very special on the economy. I must confess that it seems to me that what the Treasurer has given us is a considerable number of assertions without much substance behind them.

Surely one of the most astonishing statements ever made in this House is the honorable gentleman's statement showing that the statistics on the gross national product are not really as bad as they seem. I quote the following from my copy of his paper because I believe that it needs to be quoted and it needs to be allowed to sink in -

A second ground for doubt has been the trend of statistics of gross national product, particularly for the December quarter of 1965 which showed an increase of only 4 per cent, on the December quarter of 1964. I am informed that the main reason for this is the drop in farm income which is, of course, a consequence of the drought. I am told that if farm income were excluded the rise shown would have been of the order of 7 per cent, instead of 4 per cent.

What is the gross national product? It is a statement of the circumstances of all sections of the community. I suggest that if we look at the official document as we should, and not with the peculiar gloss that the Treasurer wants to put on it, we begin to see that the drought is not the sole reason for the deterioration in the gross national product.

I suggest that an additional contributing cause was the measures which the Government took in its Budget in August 1965 and which did not begin to take effect on the economy until the December quarter of that year. This is what the official publication, the " Quarterly Estimates of National Income and Expenditure ", for the December quarter of 1965 says -

.   . gross national product rose by 4 per cent, in the December quarter compared with the December quarter 1964, after a corresponding increase of 6 per cent, in the September quarter, both increases being less than the average quarterly rise for the year 1964-65.

So, coldly the statistics show that, in essence, the Australian economy was not as healthy in December 1965 as it was 12 months earlier or as it was 3 months earlier, prior to the impact of the 1965-66 Budget.

In a moment I will quote some other figures from this document. The Treasurer has suggested that he is carefully watching all the indicators in the economy. I will refer to a few indicators which seem to me to show that all is not quite as good as he makes out. On page 7 of the document there is a little table headed " Personal Consumption as per cent, of Personal Disposable Income ". In essence, that means that it is a table showing what percentage of their incomes people spend on consumption goods. I take the same quarter year by year in order to have similar circumstances. The table shows that for the December quarter of 1963-64 personal consumption was 80.9 per cent, of personal disposable income. In other words, people spent £4 out of £5 and presumably saved the other £1. For the December quarter of 1964-65 the index rose to 82.7 per cent. So people had to spend more of their income on consumption goods than they did previously. For the December quarter of 1965-66 the index rose to 84.4 per cent.

Does not that indicate something which surely should be a reality to most people?

Does not that indicate that in this community, in which most people depend on a wage for their existence, prices are rising far more rapidly than wages are? Does not that explain why this index is behaving as it is? Now people, instead of saving nearly 20 per cent, of their income, are saving only 15 per cent, of it - a drop of 5 per cent, in two years. I suggest that such a drop shows that prices in the community are rising far more rapidly than are the incomes of most people. That is one indicator to which I suggest the Government should give some serious consideration.

Another indicator from which the honorable gentleman has drawn different conclusions from that which I would draw - and certainly from what some industrialists would draw - concerns what he called the situation of stocks. Stocks are simply the value at a particular time of the goods which manufacturers and other people have in their stores and have not sold. Each year the Australian Industries Development Association publishes a survey of stocks. The most recent one, the " Survey of Stocks 1965 ", was delivered to honorable members only a few weeks ago. It is dated February 1966. It shows that in the period between 1st January 1965 and 31st December 1965 there was an estimated total increase in stocks on hand of £289 million or $57S million. The document says that the estimated total increase of stocks for all companies in Australia - and it makes a pretty comprehensive survey - at £289 million or $578 million, was 83 per cent, higher than the estimate for 1964 and was the second highest absolute figure for the 11 years over which the A.I.D.A. has bean compiling its estimates. It was exceeded only by the exceptional build up of £329 million or $658 million in 1961.

I want to ask people to measure that other time, 1961. The Treasurer has drawn great consolation out of the fact that in the four years from 1961 to 1965 this country has made such remarkable progress. Of course, from the point of view of the Government 1961 was a very convenient stepping off point to show that conditions had improved. But the Government does not make allowance for the fact that the depressed conditions in 1961 were a direct consequence of the economic policies it pursued. At least this indicator is a sign that what happened in 1961 may occur again from the beginning of 1966 onward. I say that because this is what the A.I.D.A. said - . . it was exceeded only by the exceptional build up ... in 1961, when high import levels were accompanied by a deliberate damping down of economic activity.

It goes on further to make this observation -

The high rate of stock increase in 1965, in conjunction with the somewhat slacker rate of economic activity in 1965 than in the previous year, leads to fears that there could be some difficulty in clearing stocks accumulated during 1965 without causing a reduction in production trends.

I prefer to take the opinion of these gentlemen who prepare that report, they being keen business people, on the situation in stocks than the soothing syrup which the Treasurer has given us in his speech this evening. The document goes on to show a number of other things. It states -

The A.N.Z. Bank's Index of Factory Production rose by 6.9 per cent, from 1963-64 to 1964-65, compared with a rise of 7.4 per cent, in the previous year. The seasonally adjusted figures for the later months of 1965 showed an easing of production trends in total, though the basic metals and electrical apparatus groups continued to rise.

Employment in manufacturing industry rose 4 per cent, between June 1964 and June 1965 - compared with a rise of 5.4 per cent, for the previous year - and this increase was the same as for total employment.

Again, the measure there is that the economy is not improving as rapidly now as it was twelve months ago. I am not trying to draw an alarmist picture of a cataclysm. I am simply suggesting, in relation to the statement that the Treasurer made on behalf of himself and the Prime Minister (Mr. Harold Holt), that they were carefully watching indicators, that different people seem to draw different conclusions from the same indicators. I suggest there is not much assurance to be drawn from the indicator as to the value of stocks. The people who compiled this document conclude by saying -

Although economic activity generally -

I repeat that this document was written in February 1966, not much more than a month ago.

.   . in the financial year 1964-65 was at a high level, there have been indications of a slackening of the rate of growth in the later months of 1965 which could carry over into 1966, especially in view of the very high level of stocks which have been built up. The need to liquidate existing stocks could well reduce manufacturing production, especially as imports have continued to rise.

The honorable gentleman seems to draw some minor pleasure from the fact that they have dropped from $265 million to $232 million. They are still a lot higher than they ought to be. The statement continued -

A.I.D.A. has pointed out many limes before -

And so has my colleague, the honorable member for Scullin (Mr. Peters) - . . that a large proportion of imports is of merchandise that could be supplied from existing capacity in Australian industries. Constructive Government policies, such as those envisaged to stimulate the use of Australian components in motor vehicles, could well be extended to ensure the optimum use of Australia's resources and to reduce the needless drain on our overseas reserves through unnecessary imports.

That is another indication that people do draw different conclusions from the same indicator.

I now come to this question of the employment level. Again the Government seems to have taken great consolation to itself because the last release of figures showed that unemployment in Australia had dropped about one thousand from the previous month. Why should there be any unemployment in Australia, a country that has so much to do and which claims to be short of certain skills within the labour force? Let us consider the components of this unemployment. I mentioned this matter during the course of the debate on the Vernon Committee's report and some gentleman reporting in the " Financial Review " said that I had made assertions but had not given any facts to support them. I will give these facts about the existence of unemployment as at 25th February 1966. The figures showed that there were 25,677 adult males out of work. There were also 11,446 males under the age of 21 out of work. I made the statement before, and I repeat it now, that surely there is something wrong with an education system when people come out of school believing themselves trained to do something and then find that industry apparently does not want them. Does that not show that some people are being trained - and these are almost the words I used before - to perforin jobs that no longer exist, and that apparently others are not being trained for jobs required by the community?

We see this more starkly in the field of female unemployment than in the field of male unemployment. Bad and all as it is to have 11,446 youths under the age of 21 years who want work but cannot get it, the situation is even more serious when we examine female unemployment. Females form probably one-quarter to one-third of the total work force. Of 28,000 females who are out of work, 16,446 are juniors under the age of 21 years. These statistics are divided into rural, professional, semiprofessional and so on and a further examination shows that most female unemployment is in categories defined as professional, semi-professional, commercial, clerical and administrative. It is not in the unskilled field at all. I repeat that most unemployed females under 21 years are found not in unskilled categories but in categories that are regarded as skilled. Does this not emphasise the point that apparently many thousands of young girls who have been to high schools and technical schools and other juniors cannot get the kind of jobs for which they have been trained?

I have no doubt that if further analysis were made - and it should be made - we would find that, in part, the tragedy lies in lack of decentralisation - a matter that has been raised often in this House by my colleague, the honorable member for Bendigo (Mr. Beaton). In most of our country towns, there is limited employment for school children when they leave school. Decentralisation is talked about but very little is done about it and there is still a drift to the cities because employment opportunities do not exist in the country towns. I am sure many mothers prefer that their young daughters stay at home. They do not want to see them thrust into the maw of the cities at the tender age of 16, 17 or 18 years. I do not blame them for their parental care. But surely this is an indicator of the trend of unemployment. The Government can console itself if it likes that this section represents only 2 per cent, of the work force but it is serious for the females under 21 years. It is a trouble spot economically and socially and it is an indicator to which the Government should turn its mind.

Another acute problem concerns housing. Again, the Government seems to get great consolation from the fact that although housing construction is not booming as it was 12 or 18 months ago, the figure is still around 100,000. It is easy enough to take a figure like 100,000 and think it is a very good number, but surely the significant factor is whether this rate of construction is adequate for the needs of the Australian community, taking into account the new families that require homes each year and also the number of existing homes that are little better than slums.

It has been suggested on this side of the House that one of the reasons for the slackening in housing is that large sections of the community have been priced out of the housing market because of high land values, the high capital cost of houses and, finally, the iniquitous thing we call the interest burden. In this connection I want to quote some figures which are indicators to which the Government should pay attention. I take them from a document which was quoted last night by the honorable member for La Trobe (Mr. Jess). The document was compiled very carefully by Mr. L. L'Estrange of 291 Bridge Road, Richmond, Victoria - in the electorate of my colleague the honorable member for Yarra (Dr. J. F. Cairns).

Mr. L'Estrangehas gone to a lot of trouble to document information about housing finance in Australia. In one of the appendices to his document he gives details of housing finance relating to Victoria, which has a little more than a quarter of the total population of Australia. This information includes a table showing rates of interest for mortgages on real estate registered with the Registrar at 3 1st December 1962. Mr. L'Estrange shows that there were 132,000 such mortgages and that one quarter of them, or 33,549, carried an interest rate of between 7 and 8 per cent. On 6,279 mortgages, or 4.74 per cent, of the total, the interest rate was between 8 and 9 per cent. On 11,424 or 8.61 per cent, of the total, the interest was between 9 and 10 per cent, and on 11,645 mortgages, or 8.78 per cent, of the total, the interest rate was between 10 per cent, and 15 per cent. Persons holding 1,536 mortgages, or 1.16 per cent, of the total, paid an interest rate between 15 per cent, and 20 per cent, and 146 individuals were in the unfortunate category of those who pay more than 20 per cent, interest.

An interest rate of 7 per cent, is high enough surely and that was the rate paid on more than half the mortgages registered in Victoria in that year. Is that not an indication of the state of the economy? In this House we often hear bandied about references to the bloke who gets an average weekly wage of £25 or £26 a week - S50 or S52 in our new currency. He is married with a child or two. What hope has he of being a candidate in the housing market with the value of land at its present level, with building costs as they are and with finance - if he is lucky enough to get it somewhere - carrying an interest rate of 7 per cent.? Is it any wonder there is some slackening in the demand for houses when about two-thirds of Australian families come within the category of the bloke with the average wage of £25 to £26 a week? We must remember something that the statisticians conveniently forget, and that is that the average wage is only what it is because there are more getting below the average than there are getting above it. In other words, many people are getting far less than the amount conveniently called the average. These are all indicators of the unsatisfactory health of the Australian economy.

The Treasurer himself referred to what he called the soft spots in dwelling construction. I have said something about that. He also referred to the drought. At long last there is to be some short term relief instead of promises of long term funds. But apparently the Government still places most of its trust in heaven where the rains come from rather than in practical methods, low interest rates and credit on reasonable terms for restocking.

I turn now to the motor industry. In this connection, I was interested to hear the Treasurer refer to what he called " a diversion of resources". This is a nice form of words but what do they mean? They mean that the deliberate policy of the Government encouraged the industry to grow to a certain size and a certain rate of annual production. In 1961 the Government found that the industry was growing more rapidly than had been expected or, to put it another way, more resources were being diverted to steel, petrol, roads and so on than the Government thought was healthy for the community. It applied to the problem what it described as a fiscal solution combined with a monetary solution. Because no alternative had been arranged for, all that happened was that the motor industry was brought to a sudden halt. As well, the Government's action threatened to run down the whole economy. Therefore, only a few months afterwards, it had to reverse its policy and allow the industry to become active again. That industry, in its present situation, does not seem to be quite as assured of its circumstances as the Treasurer appears to be. I shall quote from the February-March 1966 issue, No. 40, of the " Commonwealth Automotive Review ". This is the latest issue. Under the heading " Condition of the Motor Industry ", it states -

Motor industry leaders attending the recent annual and general meetings of the Federal Chamber of Automotive Industries in Canberra expressed a great deal of concern about the downturn in new motor vehicle sales over the period September 196S through January 1966, when only a monthly average of 29,795 units were registered. This represents a fall of 121 per cent, on sales in the corresponding period 12 months before. . . .

The publication goes on to say that in this industry there has been a decline in employment from 48,000 in June of last year to 42,000 at the present time. I suggest that there is again trouble in that industry.

I come now to my final point, Mr. Speaker. I believe that in the long run the thing that makes the economy tick is adequate purchasing power in the hands of the great majority of the people. I suggest that if one examines the figures given in the national income statement, one sees certain unhealthy signs at present. The reason for the unhealthy indications is that most people have no means of insulating themselves against price increases. Even the so called improvement of changing to decimal currency has meant systematic robbery of the average family in the Australian community of a few shillings a week. One has only to think of the daily newspapers to find an example of this. Most households buy a morning and an evening newspaper and therefore are mulcted of an additional 8d. or 9d. a week in consequence of the increase in prices resulting from the change to decimal currency. Since there was no exact conversion in decimal currency for the price of milk, the price rose by the equivalent of about jd. a bottle. This impost is far from equitable. The larger the family, the harder is the impact. Most public transport systems raised their charges because there was no exact conversion of the existing fares in decimal currency. Even the publican seems to gain a fraction of a penny on every glass of beer after the Treasury decides to increase the excise, as was done in the last Budget.

I now return in essence to where I began. If one looks coldly and carefully enough at the figures in the national income statement, I believe, can see that the beginning of the deterioration in the state of the economy arose not from the drought but from the so called fiscal remedies that were adopted by the Government in the last Budget. Those measures resulted in increases in the prices of, among other things, beer, cigarettes and petrol. We on this side of the chamber are not here to defend the rates at which taxes are imposed on beer, cigarettes or petrol. At the time when the increases were imposed, we pointed out. as a result of our analysis of the situation, that unfortunately when there is an increase in the price of a pot of beer, a packet of cigarettes or a gallon of petrol, most people do not reduce their consumption of these commodities, and the statistics bear this out. What happens is that out of the same income as before they spend more on the same quantity of goods such as these and less money is left for other items of consumption.

One of the indications of trouble in the economy at present is to be seen in the fact that purchasing power is being reduced. One could say, if one liked, that the motive power that keeps the economy ticking is being reduced. After all, manufacturers do not expand their plants unless they believe they can sell what their plants can produce. And they cannot sell what they can produce unless the consumer has money in his pocket to enable him to buy. The processes adopted by this Government, resulting in increased taxes, in prices rising as a result of the currency conversion and in general prices rising more rapidly than wages, have systematically filched purchasing power from the majority of families in the community, to say nothing of those unfortunate people who depend on fixed incomes - the pensioner groups. All had lower living standards at the end of 196S than they had at the beginning of that year. If, in the face of the warnings given by the economic indicators, the Government pursues its present policies, the people, and especially pensioners, will have worse living standards by June 1966 than they had in January of this year. Let the economic indicators be the test of the situation. There are plenty of indicators that are showing bad signs, not good.

Debate (on motion by Mr. Peters) adjourned.

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