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Wednesday, 16 May 1973
Page: 2235


Mr HUNT (Gwydir) - The Minister for Social Security (Mr Hayden) said that the

Bill has adopted the least authoritarian approach to the problem of inflation. I would say that the Government is adopting the maximum provisions available to it within its constitutional limits. I suppose that this is desirable, so long as the objective of controlling inflation is achieved. The Minister quite rightly admitted that this Bill will not in itself control inflation. The purposes of the Bill were described by the Treasurer (Mr Crean) in his second reading speech, the first purpose being to tackle the big problem of inflation. The Treasurer understates the problem of tackling inflation when he says: . one of the most obvious lessons is that policies to contain inflation must be broad and multipronged.

There is no simple solution to the problem of inflation in today's complex economic environment. Certainly, the establishment of a prices justification tribunal according to the terms of this Bill will not achieve that objective. If the prices justification tribunal alerts the Government and the public of Australia as a whole to the factors that contribute to inflation, some good may flow from its deliberations.

Inflation is the product of the actions of people - not simply the actions of employers, of manufacturers or of farmers. It is the result of a total combination of the actions and the interactions of the people within the community and it is often fanned along by unwise economic actions on the part of the government of the day. However, there are 2 obvious omissions from the second reading speech of the Treasurer. Firstly, nowhere does the Treasurer or, indeed, does the Labor Government, admit that rapidly escalating wages and salaries are an important element in inflation. Secondly, nowhere does the Government admit that its own policies and actions are a major contributing factor - I believe they are a nigger in the woodpile - in the present alarming situation.

Let me demonstrate with one example the impact of wage and salary increases on costs and the cost of living. There has been a lot of beefing about rising meat prices and their impact on inflation. Indeed, when the Prime Minister (Mr Whitlam) recently was confronted with the March quarterly cost of living index figures which showed a 5.7 per cent increase on last year's figures for the March quarter, he lost bis cool and called upon the Australian Meat Board to come for ward with what could be termed a meat price reduction scheme. In other words, the Prime Minister was blaming the farmers for the unholy inflationary mess. He ignored, of course, the recent 10 per cent increase in butchers' wages which, when ovetime payments are taken into account, contributed an overall 4c to 5c a lb increase to the price of meat. The Government ignored a strike by Victorian abattoir workers who were demanding a 25 per cent pay increase. Surely it is understood that such pay increases that do not bear any relationship whatever to productivity in essence are inflationary and are in fact passed on to the consumer? When wages rise substantially and working hours are reduced, someone must pay the price. Whether the proposed prices justification tribunal is established or not, this will still be a fact of economic life in this country.

The recent national wage case decision handed down an increase of $9 a week to the minimum adult weekly wage rates., overtime penalty payments being additional. The real purchasing power of the minimum wage has now increased by one-third since 1966. The national wage case, decision was fortuitous in that it did not follow the advice of the Government which supported the unions' case for a 25 per cent increase. However, the wage decision will have a significant effect on inflation. The average weekly pay set by the Commonwealth awards in January this year was $66.50. This will rise by 6 per cent to $70.30. Other factors are the $3 wage rise due to the metal trade workers' award in June and the higher overtime pay that was handed out then.

One question that I pose is: To what extent can these wage rises be absorbed by the economy? The first report of the. Council of Economic Advisers of the Kennedy Administration in 1962 in the United States stated that the general guide for wage behaviour to be non-inflationary is that the increase in wage rates in each industry is equal to the . . . rate of overall productivity increase'. The problem in Australia is that our productivity performance has been relatively poor - about 2 per cent. Moreover, in 1970- 71 and 1971-72, productivity in non-rural industries actually declined. The natural scope for the Commonwealth Conciliation and Arbitration Commission and the central role of the Australian Council of Trade Unions within the union movement tend to accelerate the rate at which money wage increases in industries achieving rapid improvements in productivity spread to industries achieving more modest gains.

The other important factors in the inflation problem are the policies and the actions of the Government itself. The Treasurer referred to some of them in his second reading speech - domestic monetary measures, overseas capital inflow and the capital expenditure programs of the Government. The Treasurer referred to the revaluations of the Australian dollar as being introduced to try to stop or to level out the inflationary spiral. There is no evidence to suggest that the double barrel revaluation upwards of the Australian dollar will ease inflation. Indeed, evidence is mounting that inflation will continue to rise at a record rate and this is not at all surprising. The spending spree of the Labor Government which it has demonstrated since taking office by throwing around taxpayers' funds like chicken feed has, of course, a political objective, but we now face a record deficit at the end of this year.

It has been said tonight in this debate that the former Government contributed to some of this deficit and this may be a fair comment for Government spokesmen to make. But the truth of the matter is that the deficit is mounting to an alarming figure and, of course, this sort of deficit budgeting must be inflationary in itself. In the public sector, running costs of the departments will increase by no less than $35.5m because of increased awards, equal pay, holiday benefits and so on. Not only can we expect substantially increased taxation, perhaps not this year but in 1974; we can also expect a violent surge of inflation leading, I believe, to stagnation in the private and commercial sectors. Of course, one does not have to be very bright to know what will happen then. This will be followed by unemployment. This has been the pattern that we have seen around the world and we hope that we will not see a return of the fears of unemployment as a result of stagnation which could be caused through lack of confidence in the private sector.

Regrettably, this change in economic management came at a time when the Australian economy was actually gaining in momentum, when confidence was returning, when export industries were taking advantage of better markets overseas, when unemployment was falling due to measures that were taken in the last 6 or 7 months of the reign of the McMahon Government and when there were signs of a slowing down of the inflationary rate which became apparent early in 1970. The other serious factors that will push inflation to the roof are, of course, the Government's support of union claims for a 35-hour week, which looks like coming into effect over the next year or two, costing not only the employers but also the Australian people an additional $3,000m annually. Much of these wage increases in fact will be passed on to the housewife - the consumer. It cannot be avoided. This will undoubtedly add a further 10 per cent to the cost of goods alone.

All these concessions to which I have referred that take place without any increase in productivity or production must in themselves be inflationary and have serious consequences for the average individual. It does not matter how many committees or tribunals the Government establishes; we are faced with inflation while ever the Government ignores the fact that increased wages without increased productivity will in fact contribute to the inflationary cost and while ever it ignores that its own expansionary policies will be a contributing factor. The record Budget deficit that we face, the increased Government expenditure, the increased wages and salaries, the shorter working hours and the longer holidays are all factors that will contribute to an inflationary spiral. Here we see the establishment of a Prices Justification Tribunal with, to quote the Treasurer, 'a membership of people with no qualifications for membership specified'.

This is a Bill in respect of which the Government can claim to have a mandate. I believe that it is hotchpotch legislation which no doubt will cause confusion and uncertainty in day to day business operations. It no doubt will create enormous and unnecessary administrative burdens on companies without achieving its proper objective - costly burdens which no doubt will be passed on. It will operate in a discriminatory manner against those companies which are singled out for special treatment. The Act will apply only to certain companies, namely, those whose receipts from the supply of goods or services, or both exceeded $20m in the previous 12 months. The Act also will apply to each company in a group of companies where the business receipts of the groups exceeded $20m ia the previous year. The criterion that necessarily is involved is not the economic impact of the activity of a particular company but the size of its turnover. Sub-clauses 18 (1) and (2) of the Bill are the important operative provisions. They prohibit the supply by an affected company of goods or services of a particular description at higher prices without resort to the procedures set out relating to the Tribunal. They prohibit the supply of any new goods or services without resort to the procedures of- the Tribunal.

The term 'goods of a particular description' is not defined but presumably means every variety of item which is capable of being described with particularity. Thus, each single item of the many thousands of items on sale on the shelves of the supermarket constitutes goods of a particular description', but just how particular the description needs to be is not clear. For example, a motor car dealer may sell Holden motor cars of a particular year of manufacture in many combinations of optional extras, colours, types of tyres and so forth. Is each car to be regarded as 'goods of a particular description'? Take the case of a company which is affected by the Act and which controls a chain of motels. One of its motels may receive a supply of eggs from a local producer. By reason of seasonal fluctuations the local supplier may raise the price of his eggs. That motel, which is in competition with other motels in the area, may wish to raise the price of this item on its breakfast menu. Such a meal no doubt would constitute goods of a particular description'? Before the motel can raise its price it must notify the Tribunal and be subject to the procedures outlined in the Bill.

Precisely the same considerations would apply to a vast range of other goods sold at the motel - matches, cigarettes, newspapers, drinks and so forth. In the event of any proposed price rise, the cause of which is quite beyond the control of the motel' a similar procedure must be followed. Not only will this involve a vast administrative effort, but it is unfair in its operation because motels which do not happen to be part of the chain owned by the company affected by the Act but whose prices are related to precisely the same considerations can raise their prices without resort to the Tribunal's procedures at all.

I could go on. There are many strange anomalies in the Bill. I think the Bill will be extremely difficult to administer. It will be very difficult to follow through some of the items that the Tribunal will be called upon to examine. Under this Bill in its present form inordinate delays in the reaching of decisions by the Tribunal could occur. This delay would be quite outside the control of the affected party. The Bill has been conceived without any prior consultation with industry and commerce generally or with the companies which will be affected by the Act. This seems to be an extraordinary approach by a government which has a responsibility not only for individuals within the community but also for the people who serve individuals and for companies within the community. How can the Government form legislation and put it into practice unless it takes into account the interests or the attitudes of the people over whom the Government is professing to keep some control?

It is clear enough that the effect of the Bill in terms of its practical application and economic impact is ill conceived. In its present form the Bill will produce results that will be unworkable, unrealistic and unfair; Nevertheless, it is true to say that the Government has a mandate from the people to establish such a tribunal. It is doubtful that it will achieve anything other than confusion. It is the pudding of the Government made from a Labor Party recipe. It is to be hoped that the Government has the capacity to stomach the consequences of the Bill. It is my hope that the Australian community does not suffer as much as I think it will from its ultimate inflationary dispepsia.







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