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Wednesday, 28 March 1973
Page: 792


Mr GARLAND (Curtin) - The object of appointing a joint Parliamentary committee on prices is to make that committee part of the machinery that the Government wants to set up for prices justification in the community in order to inhibit price rises and thus reduce the rate of inflation and increase purchasing power. The Government and its trade union supporters believe that existing levels of prices are too high and that wage rises can be absorbed by companies very readily without damage to their investment policies and that price rises are indeed the cause of inflation. Government supporters have stated that wage and condition increases are justified and that they have little to do with inflation. Perhaps there are those who do not think so in Labor ranks but who are, nevertheless, not prepared to say so.

Other countries with comparable economies to Australia's have imposed prices and incomes policies with restraints of a significant nature which have had a deep effect on all sections of their communities. It is arguable whether these policies will be of much value in the long term. But in the short term they seem to have been of considerable benefit in the United States of America. This Australian Government's policy is directed entirely at one side - that of prices. There has been no mention of wage restraint, although references are made from time to time to the arbitration system, implying that some sort of control of wages exists. Indeed, the Treasurer (Mr Crean) made such an implication in answer to a question as recently as 2 weeks ago at a meeting in Melbourne. But, of course, the arbitration system is not a control on wages - on maximums. It only sets minimums of amounts and conditions. Furthermore, the policies of the present Minister for Labour (Mr Clyde Cameron) are encouraging more collective bargaining agreements outside the arbitration system which, of course, weaken the system and lead to excessive wage and condition increases on top of the increases allowed by the arbitral authorities. Indeed, this policy has a greater effect than that because collective agreements do not involve only the immediate rises. They also have an impact on the whole range of arbitration decisions because clearly the Arbitration Courts try to keep up with outside increases or else they will lose their influence. Thus a few collective bargains can mean a big overall change.

It seems odd that at the moment when other Western countries are trying hard to find new institutions to implement prices and income policies as a means of stopping or inhibiting inflation rises, the Australian Government should bring more and more pressures to bear on the arbitration institution, and indeed one gets the impression and idea that the Government wants to dismantle it; when it is the only means of restraining wages. Just what powers are open to a Commonwealth government to control prices and wages? This is a matter of considerable concern and legal complexity in this country. However, those countries which have no legal difficulties in regard to controlling prices and wages do not seem to have found the use of a prices and income policy to have in the result greatly inhibited the rate of inflation which, after all, has been prevalent overseas for the last 3 years or so and which came to Australia somewhat later on, and until recently in a less virulent form. Many Labor supporters have called for price control. But the Government's present policy is to form a prices justification tribunal and a joint parliamentary committee on prices. It is apparently its belief that there are enough prices which are unjustifiable to make public knowledge of the details result in fewer and lesser rises. But can that be generally sustained? We know that during the war there was price and manpower control under the national emergency regulations and that sustained efforts Were made to control all aspects of the economy. The result of this was, firstly, a great bureaucracy investigating the books of every firm in the country, and incidentally those many inspectors who were overzealous and seemed to delight in unreasonable behaviour; secondly, the formation of black markets and/ or hidden cash payments; and, thirdly, constant price rises.

A further strong argument against a prices justification policy is that in many areas justification of price is relatively easy. Indeed, the endorsed price takes on an official aura which allows those who are clever in justification to apply for more rises than they otherwise would be able to carry out. This surely discourages a search for increased efficiency since it reduces cost pressures and even competition. The Government's concentration on prices and the exclusion of wage control is in essence an irresponsible attack on a section of the economy because it ignores the other essential sector which would give the whole scheme any chance of success. Clearly the Government has put forward this proposal because it is not prepared to face the criticism and to contest the ambition of leaders of the trade union movement. The Government's proposal is political grandstanding and a sham of a policy because a greater number of economists in Australia and outside Australia who have knowledge of Australian conditions would advise the need for a joint prices and incomes policy. Effective responsible policies must involve both wages and prices.

The first report on Australia by the Organisation for Economic Co-operation and Development - an objective, detached body of the highest competence - referred to by the Leader of the Opposition (Mr Snedden) makes that assertion clear. Incomes and prices policies of restraint are of the highest economic complexity. To be effective as part of the Government's policy, employing all the economic tools, available to a government, both fiscal and monetary, requires the most skilful management by any government. Yet it is most necessary if the objectives of higher eco nomic growth, lower rates of inflation and even lower rates of unemployment are to be achieved instead of just being talked about. AH political parties here are agreed that these are important objectives, so to say that all that is needed is a justification of prices policy in this area is not a serious attempt to tackle the problem.

The Government has failed completely, today and previously, to make a case to demonstrate that this parliamentary committee will be effective in any way. It is only propaganda. One recalls a similar type of proposal being put forward by the last British Labour Prime Minister, Harold Wilson, in his first year of his Labour government, speaking of the need for the United Kingdom to increase its growth rate. He merely urged greater efficiency. That was all nonsense. It was laughed at at the time, and the growth rate did not go up. Nor will prices go down under this measure. The Prime Minister (Mr Whitlam), not noted for an interest in economics let alone an understanding of it, has made scathing comments from time to time about economic management as the use of stop-go policy. He has implied that the Government can plan the economy, foresee all the influences, and efficiently ensure smoothness. Does that mean that he will ignore the tools of control in his hands for greater growth, for diminishing inflation and for encouraging investment and employment and use those tools he has, such as interest rates, levels of government expenditure, the level of raising revenue and directing it into particular sectors, currency rate variation, bank lending through the Reserve Bank, variations in the flow of foreign investment, and all the influences and control available to the Government and its instrumentalities? The answer is that he has already used some of those tools. They are essential to economic management, and it is complete nonsense to pretend that they will not have to be invoked, sometimes suddenly. As a former Prime Minister of Britain once so aptly answered to a gibe about stop-go policies, 'How else can you drive a car in busy traffic?'

To make a general observation, it seems to me to be tragic and ironic that, while this Government has expressed its intention - most formally recently in the speech it wrote for the Governor-General's Address - to initiate policies for greater growth and employment and less inflation, all its policies are aimed in the oppoosite direction. Although it has revalued the Australian dollar in a deliberate unilateral act, all its policies internally have the effect of reducing the value of the Australian dollar. Successive wage rises are supported by the Government, tacitly or directly, no matter what quantity they are. There is no regard for whether the productivity increase is sufficient to meet them. In reality no steps have been taken to improve productivity. The Australian Labor Party, led in this instance by its Minister for Labour, is encouraging collective bargaining, encouraging firms to give 4 weeks annual leavel, encouraging a rise in the minimum wage and encouraging the spread of the 35-hour week. The claims go right across the board. The Government complains about mineral export prices being too low, but promptly revalues the dollar - deliberately once and later by acquiescence - against the United States dollar and reduces export prices by 20 per cent within 6 weeks.

It is most pertinent to this debate to note the recent re-statement by Mr Justice Kirby - he quoted the late Mr Justice Dixon - in support of his view that the arbitral authorities cannot and will not accept any responsibility for economic management in making their awards and determinations. He said unequivocally that that is the duty of the government of the day. That has not always been the attitude of the courts but if it is to be the attitude throughout, I believe that the Party which I represent, which has always, had a policy of supporting awards and determinations of the arbitral authorities, believing that the handling of disputes is best left to arbitration and conciliation, may have to review that policy and outlook.

Times are changing. We have an unacceptable rate of inflation. In view of the overspending and other policies of this Government, I have no hesitation in predicting an increased rate of inflation to an even more unacceptable level of perhaps Si per cent or 9 per cent within the next 18 months. The impact of the decisions of arbitral authorities is not insignificant in this and the Commonwealth Government has a limited number of options open to it in controlling the economy. It has by no means full power over wages, yet the Australian people look to it alone to provide stability, growth and opportunity. It is long since settled that the Commonwealth is responsible for that policy. In future Commonwealth governments will have to imple ment effective prices and incomes policies. In seeking ways to combat the awful attrition of unacceptable inflation which we have seen in comparable economies in Europe and North America, perhaps that attitude I referred to of my Party towards awards and determinations cannot be sustained. If it is the judgment that a particular comprehensive set of prices and wages policies of restraint will have a beneficial effect in the areas I have mentioned, apprehension about all government involvement in the private sector becomes less and less a philosophical problem for me.

The foreshadowed rise in the March quarter of the consumer price index is at an annual rate rising from 6 per cent to 8 per cent. But the restraint on the inflationary pressure through the revaluation of the dollar must be recognised to be quite minor. A parliamentary committee or any other committee will have to solve some very thorny issues before criteria can be laid down for determining whether any price rise is justified. The Government has not laid down any target for price increases. The full problems of inflation, and growth equity will emerge in the next year or two. I believe they are the greatest of our economic problems. This motion of the Government is mere window dressing, an insult to serious consideration and is inconsistent with its policies of vast spending without increased productivity in which it is at present engaged. Its new policies exacerbate the difficulties and bring us closer to a more tragic economic condition.







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