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Wednesday, 28 March 1973
Page: 805


Dr GUN (Kingston) - 1 have much pleasure in supporting the motion moved by the Treasurer (Mr Crean). I believe that the Committee this Parliament will set up to examine prices will be very valuable. Its work will not only assist the members of the Committee and other members of the Parliament in apprising themselves of the various factors that go to make up the pricing structure but also will achieve some positive gains through examining the prices, in certain cases, of individual goods and services.

The main reason I rise to speak in this debate is to deal with 2 assumptions that are frequently made by members of the Opposition, though 1 noticed that the previous speaker, the honourable member for Mackellar (Mr Wentworth), dissociated himself from the assumptions I will mention which are in relation to wages. The 2 propositions that I want to deal with are frequently raised by my Party's political opponents. The first assertion is that inflation is wholly or nearly wholly due to wage increases. The second is that the way to overcome inflation in the community is merely to increase the forces of competition and to allow the free interplay of market forces. I believe that both of those propositions require fairly heavy qualification.

I deal firstly with the assumption that only wages are responsible for inflation. If one follows on from this assumption one might therefore go on to assume, as is often assumed by the Opposition that somehow the greedy wage earners should restrain themselves from avaricious wage demands. I believe and this Government believes that in a democracy wage control is neither desirable nor practicable. Wage earners do not operate by taking a conscious decision to plunder the rest of the community. Wage demands are made by a group of employees in an industry in response to a specific set of circumstances.

To suggest that such demands should be restrained artificially seems to me to be an unusual proposition from the champions of private enterprise and free enterprise, because they seem to be saying that we should not restrain the free forces of the market except in the case of labour. Labour really operates in the market place too. The price received for labour is largely a reflection of the demand for labour in various fields. If one tries to interfere with this mechanism with such things as penal provisions in the Conciliation and Arbitration Act one interferes only with the market mechanism. This attitude seems to be an extraordinary anomaly on the part of people who advocate unrestrained private enterprise.

This Government is not prepared to make a stand in principle against wage increases. We believe that wage increases in themselves are intrinsically a good thing. It is only if they cause price increases that they can have deleterious effects on the rest of the community. These effects will occur only when wage increases are in excess of increases in productivity. In such cases price increases can occur. That does not mean that if we do not achieve the necessary increase in productivity we should restrain wage increases.

The Government's job is to try to improve the rate of economic growth so that productivity increases can cope with wage increases so that price increases will not occur. But if price increases do occur we do not think it is our job to try to restrain wages. We should try to improve productivity. This is our belief and it is the belief which has mostly been held by the Commonwealth Conciliation and Arbitration Commission over the years. There have been a couple of lamentable lapses from this policy but by and large the Commission has held the view that if prices rise without an increase in productivity, it is nonetheless incumbent upon the Commission to increase wages to maintain and to sustain the purchasing power of wage earners. This is a policy to which this Government subscribes also.

It has been said earlier in this debate, and 1 would agree, that price rises can result from causes other than wage increases. I think that a good example of this was the recent case involving proposed increases in steel prices by Broken Hill Pty Co. Ltd which was heard by Mr Justice Moore. T do not wish to argue the merits one way or the other of the BHP case. However, one of the facts which did come out of that case was the extraordinarily arbitrary nature by which price increases are determined by the large companies, particularly if the situation in respect of their activities is not very competitive. Having regard to the fact that so many price increases are decided on a completely arbitrary basis, surely it would be a remarkable coincidence if it was never the case that the price increases were excessive in some way or, in other words, if they did not represent an unseemly high level of profit. One of the purposes of the proposed Committee will be to establish a mechanism additional to that which already obtains to ensure that excessive price increases which may represent an excessive level of profits will not occur.

The other assumption that is frequently made by the champions of private enterprise is that all that -we need to do to control excessive price increases is to have an adequate degree of competition. They say that prices should not be fixed artificially because this will cause bottlenecks and so forth. They contend that the only action to be taken is to increase the competitive forces in the economy. I agree that excessive price increases do occur if competition is limited. But this also needs very heavy qualification. Just to say that one is against competition will not stop these things happening. In fact, the introduction of anti-competitive practices legislation in itself is not sufficient to restrain price increases.

I invite honourable members to consider what happened following the introduction of resale price maintenance legislation in the last Parliament. One might have hoped that the passage of that legislation would have meant a downward pressure on retail prices. But, in fact, the effect of this legislation has been minimal. Prior to this legislation a wholesaler would say that he would supply to a retailer only if that retailer undertook to sell the wholesaler's goods at a specific price, and if the retailer did not sell at that price, supplies would be withheld by the wholesaler. Under the resale price maintenance legislation it became illegal for a manufacturer to threaten to withhold supplies from a retailer who did not conform to his demands. But the point is that it was not even necessary to have this threat of a sanction by which supplies were withheld because it was in the interests of all retailers to operate a little collusive practice whereby they all agreed that they regarded it as in their own interests to maintain resale price maintenance. So, the threat of retaliation by wholesalers was not even necessary.

The same could be said in respect of any attempt to outlaw collusive practices among manufacturers. We passed legislation to try to eliminate collusion, but that legislation was ineffective as well because collusion was not even necessary. Manufacturers understand what is in their own interests. They do not wish to cut each other's throats. They have nice cosy little arrangements. Whether those arrangements are made openly or privately does not make any difference. They come to a common agreement. The passage of legislation, therefore, does not make any real difference to the existence of monopoly and anti-competitive practices.

This is referred to in Galbraith's book 'The New Industrial State', in which he refers to the activities of companies which enter into collusive practices. He says:

.   . the 3 majors in the automobile industry, as he result of long and intimate study of each other's behaviour within the confines of one city, are able to establish prices which reflect the common interest. And they can do so with precision. No consultation is required. The procedure is legally secure. Not much would be changed were the companies allowed, in fact, to consult and agree on prices.

The point that I am making is that merely passing anti-competitive legislation is no guarantee that these practices will not continue. For that reason I believe that we must have an extra mechanism which will be supplied in the form of this committee to examine the prices of goods and services and subsequently in the establishment of a prices justification board.

I believe that we have pretty ample evidence already of what can be done by examining the prices of particular goods and services and then the Government threatening to use its power to give?* contracts, subsidies and so forth to force prices down. I refer honourable members to the report of the House of Representatives Select Committee on Pharmaceutical Benefits which was presented to the previous Parliament. The report contains a couple of tables which show what the Commonwealth Department of Health has been able to achieve in the field of prices. The Department can go to the individual drug companies and say: 'We are examining the price of a particular drug that you are manufacturing. We believe that you could charge a lot less. Other companies which manufacture the same drug charge less and we believe that you should do the same.' The Department can then say: 'If you do not reduce the price of your product which is of an equivalent quality to other products on the pharmaceutical benefits list and if you do not conform to a reasonable pricing arrangement your product will be delisted. Nobody will ever convince me that we cannot have a very effective mechanism to restrain price increases by just examining these things and then making recommendations to the manufacturers by saying: 'We require you to lower your prices, otherwise the favoured arrangement that you are getting from this Government will be withdrawn'. As evidence of the effectiveness of this approach I seek leave to incorporate in Hansard tables which appear on page 55 and pages 64 and 65 of the Report of the Select Committee on Pharmaceutical Benefits.


Mr SPEAKER - Order! Is leave granted? There being no objection, leave is granted. (The documents read as follows) -

 

 


Dr GUN - If honourable members look at these tables they will see that very significant gains can be made in this field. I believe that the proposed parliamentary committee will be able to extend this inquiry to examine a whole range of goods and services with a very beneficial effect in exerting a downward pressure on the price of goods and services supplied throughout the economy. Therefore I have very much pleasure in supporting the motion moved by the Treasurer.

Question put:

That the amendment (Mr Lynch's) be agreed to.







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