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Tuesday, 14 September 1971
Page: 1238


Mr REYNOLDS (Barton) - Mr Deputy Speaker, I rise to support the amendment moved by the Leader of the Opposition (Mr Whitlam). I shall not say very much about what was said by the Minister for Social Services (Mr Wentworth). His sentiments are well known. He is regarded as one of the ultra conservative people in the Government who is forever defending profits but who, on the other hand, makes a wholesale condemnation of wage and salary earners as being the arch priests and the architects of the price inflation which exists in the community. Of course, I did not hear the Minister have a go at the doctors when they were threatening to withhold their services unless the Government gave way and provided them with the kind of financial inducements that they required; I did not hear the Minister or any of his cohorts in the Ministry decry the farmers who marched down the streets of Melbourne because the Government was refusing to give them the kind of support to which they thought they were entitled; I did not hear the supporters of the Government deride the airline pilots when they wanted a salary increase. It is the ordinary wage earner in the community who is the butt of all Government attacks. Similarly, at the outset of his speech I heard the Minister say that it was the Government's sense of responsibility that prevented it from doing all that it wanted to do in this Budget. I suppose it was that same sense of responsibility that has prevented the Government from giving help to thousands, of elderly people in nursing homes who are paying upwards of $30 a week and it was the same sense of responsibility that prevented it from providing assistance to kindergartens to help mothers with children in such places while they go to work.

I should like to say something about a few items in this Budget. I want to talk about the spending slump and the Budget's misguided strategy. I want to make a closer examination of the factors influencing prices. I should like to say a few words about the neglected nationwide survey of educational needs and, if I have time, I should like to talk about the lack of Government planning in this nation. To my mind, the general view of the Budget seems to have been aptly expressed in an article written by David Lowe and published in the 'Sunday Australian' on 12th September.

He said, amongst other things: Our whole economic growth potential is being shcakled to deal with one internal structure problem - cost push inflation

Later the article stated:

MrLynch says it requires a change in manage ment attitudes. More to the point it requires a change in Government attitudes. Government is the job of governments, not of business.

All the commentators that I have read in recent times are indicating to the Government that it is about time it made use of those powers that have now been confirmed by the High Court, in devising more effective means for controlling the price structure as well as other elements in our national economy. I have indicated that I regard this as being a very misguided budget strategy and that view is supported by what is a friend, I suppose, df the Government - the Australian Industries Development Association. In its recent bulletin for September 1971 it said in part:

The I960-

Everybody remembers 1960-61, of course, the year of the great credit squeeze - fiscal measures overkilled the- boom that was well on the way to petering out. In 1971-72 the Budget sets out to dampen excessive demand that is not there.

Among the facts cited in support of this view is the fact that personal consumption expenditure at constant prices increased by only 2.7 per cent in 1970-71, the lowest increase, I might remind the House, since 1965-66 when it was 2.6 per cent and the same as the increase in 1960-61, a year of depressed economic activity. So in fact there has not been any upsurge in personal consumption so what is all this story about inflation being caused by such factors. Matching this there has been a decline in private investment expenditure. The same body as T quoted a while ago - AIDA - says:

Business must bc alarmed at the Government's fiscal measures.

It goes on to say:

Increases in company tax, in Post Office charges -

I am sorry the Minister for Social Services is leaving the House because he would see in his own budget measures some of the real roots of inflation - in excise duties on motor spirit and other fields can only add to the escalation of costs and prices throughout the economy.

It does not require any great sophistication to recognise that if we build into a budget these extra taxes and charges we must expect that they will have an effect on the price spiral. The Commonwealth statistician's figures show that in the 6 months to December 1971 it is expected that new capital spending is expected to rise by only 7 per cent as compared with 18 per cent in the previous 6 months to June this year. This prompted the economist for the 'Australian', Kenneth Davidson, to make this remark:

So far- and I think we should all take notice of this in view of what the Prime Minister (Mr McMahon) had to say today - most of the statistical evidence which has emerged since the Budget has pointed to a steeper downturn in the business circle than the Government expected.

He went on to say:

This is likely to show up in an even higher level of unemployment than the Government had planned as a result of the deflationary, Budget.

Then we got the news yesterday that unemployment increased by over 7 per cent during the last month. It now stands, on seasonally adjusted figures, at 75,000. It is expected that if this trend continues unemployment by February next year - not a long time away - could reach 120,000. We have to remind ourselves that approximately 180,000 young people are about to leave school and will be in the market seeking jobs. From my personal observation around the place - having youngsters of this age group myself - jobs will be a lot harder to get during the remainder of this year. Even those who are already soliciting jobs for the Christmas vacation are finding them ever so much harder to tie up than they have been in previous years. 1 want to say just a little more on this business of price inflation. The Minister, of course, was all out to indicate - as were plenty of other Government supporters - that increasing wages were the real cause of inflation in the community today. While the Government has been preoccupied with slamming wage earners for their' alleged part in causing inflation it has had preciois little to say on the influence of the finance industry in Australia in recent times. Why should it say anything about the finance industry - the hire purchase companies, the extra-banking institutions in the community? They are well known for their financial support to the Liberal Party so why should the Government criticise them? But let us just have a look at the recent profits of some of the bigger of these financial institutions. The Commercial and General Acceptance Ltd set a commanding lead in the 1970-71 profit stakes by a 40.5 per cent jump in net earnings over the previous year. Custom Credit Corporation Ltd - another big one - had a profit gain of 31.3 per cent. Associated Securities Ltd increased its profit by 30.2 per cent and the Australian Guarantee Corporation Ltd by 25 per cent. IAC (Holdings) Ltd, the other one of the big 5, has not yet disclosed its profit because it does not balance its books until December. Just from these few examples we have some indication of where price inflation derives in this country today. It is not all a matter of wages and salaries.

The link between these big institutions and various private banks is well known. The question is: How long will it be before the Government takes steps to bring these extra-banking institutions under the same controls as apply to banking? Dr Harold Bell, the economic adviser to the Australian Mutual Provident Society and a very respected economist in our community, in a paper titled 'Desirable Developments in Economic Management in Australia' in June this year said, amongst other things:

In total, however, and especially having regard to associations with multi-national corporations or large international financial groups,, the quasi banking structure outside the inner circle of the officially and directly controlled banking structure and authorised money market is now a highly significant element in the Australian economy.

Dr Bellwent on to say:

While these operations are inevitably affected by monetary policy there is. lacking that directness of control that applies to the . official banking and money market structure.

In other words, these big financial institutions are setting a hot pace in profit making in the business of dispensing finance in our economy and, of course, anyone knows that a rise of 1 per cent or even half of 1 per cent in the rate of interest as it pervades Tight through the economy can add greatly to our cost structure. Of course, there was not a word about that from the Minister. Dr Bell went on to spell out the need for more information about the amount of short term hot money pouring into Australia. He said: . . it is fair to say that in some important areas of activity the paucity of satisfactory information stems largely from reactionary inertia.

In other words, a Tory conservative government here has a policy of 'hands off the big financiers' whether they be local or international. Dr Bell went on to say that Canada's study of its situation of international hot money pouring into the country puts our meagre official sources of information to shame'. That is just the position. We do not know what is the effect of this finance, and this Government could not care less how these big financiers are exploiting the Australian community.

The previous Prime Minister the right honourable member for Higgins (Mr Gorton) made no bones about what caused a steep rise in the consumer price index for the last December quarter. He claimed that about 42 per cent of the rise was due to budget increases - this is last year's Budget we are talking about now - in excise on cigarettes, wine and petrol, and in telephone rental charges, postage and so on and yet we get a repeat of it in this year's Budget. Then the Prime Minister gets up and says: 'Does the Opposition know what causes inflation?' The Prime Minister may well look at what his predecessor had to say about the effect of budgetary increases and these regressive forms of taxation and charges for public services. On 23rd February of this year a very eminent person who ought to be acceptable to the Liberal Party - the Liberal Premier of Victoria no less - was reported in the 'Australian Financial Review' as saying that a 6 per cent wage rise granted by the Conciliation and Arbitration Commission was a contributory factor to inflation, but not the only cause. Sir Henry Bolte said:

I would place interest rates ahead of wage rises as a cause.

He went on:

If there hadn't been a 7 per cent bank rate, there wouldn't have been a 6 per cent wage rise.

This put the finger right on a basic problem of the Australian economy today. The simple fact is that this Australian economy has the highest, or nearly the highest, interest rates in the world. It is no wonder that hot money pours in here. The Government takes credit that it, as a so called stable government, is attracting this kind of investment. Of course the Government will attract that kind of money if it is prepared to leave the Australian economy wide open.

I would now like to turn to one other important matter that was not mentioned in the Budget - that is the nationwide survey into education needs in Australia. This survey, honourable members might remember, was to cover the needs of both government and non-government schools in primary, secondary and teacher education for the 5-year period from 1971 to 1975. It was estimated as a result of this survey that there would be required from the Commonwealth over this period an additional $ 1,443m to bridge the gap between the needs of the 6 States and their anticipated funds likely to be available to meet those needs. As I have said, we have to remember that this estimate referred only to primary, secondary and teacher education. It said nothing about pre-school education, education of the handicapped or technical education. The sum of $l,443m refers only to the government sector of state education in Australia. There was a survey of the requirements of nongovernment schools but so far, for some unfathomable reason, the Commonwealth will not reveal what the survey showed would be needed by them over the 5-year period. The Commonwealth now claims that as a result of adjustments in the financial arrangements between itself and the States at the last 2 Premiers' Conferences, the States have been provided with enough extra finance to meet the needs as measured by the survey. As yet the Commonwealth has provided neither the Parliament nor the public with any information or analysis to back up its claim. It should be done at once.

With the assistance of the Parliamentary Library Legislative Research Service I have endeavoured to analyse the position from such information as is available. Because of the number of assumptions that have to be made, in the absence of definite information, it is almost impossible for me to know whether the gap between educational needs and anticipated State finances can be closed. At least in respect of capital needs - school buildings, equipment, land and so on - it seems most unlikely on the analysis I have made that the States will have anything like the necessary funds available oyer the 5-year period. That would require an estimated growth in capital funds of almost 28 per cent. But Commonwealth capital grants to the States in 1971-72 amounted to only 4.5 per cent. One has to remember that $722m was the estimated extra capital requirements over the 5-year period. Another $722m was the extra recurrent expenses required.

Here again 1 remind the House that I am talking about only the government sector. Neither Parliament nor the public, as I have said before, has ever been told how the huge deficiency in anticipated capital and recurrent funds, amounting to $ 1,443m, was to be met. It could have been in 5 equal instalments over the 5 years. If so, the Commonwealth was being asked to provide $228m extra for state education in each of the 5 years. If that was the proposition, then the new CommonwealthState financial arrangements will go nowhere near meeting that target in the first couple of years. I remind the House that it is a 5-year period.

The other alternative is that the extra funds required would be on a statistically projected scale upwards. The research shows that in this case the extra funds needed in 1971-72 would be something of the order of $65m to $70m. This would be probably a manageable amount. But by 1975 the amount required would have progressively risen to about $570m extra for that financial year. If this is to be the pattern of assistance to state education it will be in dire trouble from about 1973 onwards. As a matter of fact if is already in dire trouble. This situation applies to government and non-government schools.

It must be remembered also that in all the calculations it has been assumed that the States will maintain the high priority that they have given in their budgets to education over recent years. There can be no guarantee of that because the States have been saying that they have been driven to make a high proportion of their funds available for education to the neglect of so many other sectors of their economies. In fact the basic assumption in estimating these needs over the next 5 years is that the States would increase their allocation by 10 per cent each year. It was in spite of that growth of expenditure from the State's own resources that they estimated that another $l,443m would be needed from the Commonwealth.

As I said, this calculation takes no account of the non-government schools; it does not take any account of those other sectors of education which I mentioned. As a matter of fact, the strong indicators are that the State governments are not in a much better position to meet these extra requirements of education. If this was not so, why would the States be making great increases in taxation and charges that they themselves are making? Why would they, for instance, increase payroll tax by 40 per cent, hospital charges by 50 per cent and sometimes more, and transport charges by over 50 per cent? Why would they introduce new taxes? All of these things indicate that the States are probably in little better condition now to meet these massive needs of education than they were before the recent financial agreements.

I conclude by saying this: This Budget does nothing to correct the basic economic and social imbalance in our society that is typified by flourishing financiers amid squalid schools, pensioner poverty and rural rot. After 22 years of LiberalCountry Party coalition governments our national legacy is one of car-choked cities, a continuing and increasing drain of people away from the countryside into overcrowded urban areas, exorbitantly inflated land prices in' a continent with land literally to burn, usurious interest rates that rank among the world's highest and growing government sponsored inequalities of opportunity that increasingly favour the privileged as against those whose only inheritance is need and want.







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