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Thursday, 17 May 1973
Page: 2285


Mr HAMER (Isaacs) - Although I have doubts about its effectiveness, I accept that this is a very important Bill. Inflation is a great problem in all developed countries, but none has yet found a solution, except perhaps those prepared to use ruthless totalitarian methods or to accept a high level of unemployment. The Treasurer (Mr Crean) rightly rejects the deliberate creation of a high level of unemployment as a means of controlling inflation, and in that we on this side of the House strongly support him. But the combination of high employment and low inflation is a very difficult one to maintain. The Treasurer in his second reading speech very generously pointed out the excellent record that the

Liberal-Country Party Government had in this respect for most of the 1960s. The last few years, for reasons not unassociated with the change of leadership of the Australian Council of Trade Unions, have seen a worsening of the inflationary situation. Both sides of this House have a duty to approve any proposals of the Government which are likely to reduce this inflation, an inflation which strikes at the roots of our society and damages most those least able to defend themselves.

In his second reading speech the Treasurer referred to the Government's submission in the recent national wage hearing, when the Government said, in effect, that the Arbitration Commission could go ahead and grant large wage increases because the Government would control inflation through demand management. These are pious words and seem to give demand management a dominant importance as an anti-inflationary tool which all recent experience in full employment economies around the world would suggest is greatly exaggerated. I think that one of his Treasury advisers must have been on top instead of on tap.

What is this Government's record on demand management? It came to power after promising extensive and expensive programs in almost every aspect of our affairs - health, education, social security, housing, urban development and protection of the environment. Most of these have desirable aims, although we on this side of the House would frequently question the methods by which they are to be achieved. But what is quite clear is that the only way they can be achieved, unless personal consumption is to be reduced through increased taxation - the Government has promised not to do that - is by a rapid rise in national production. One would have expected a sane government or one under any sort of effective leadership from its Prime Minister, faced with a dilemma of expensive promises and rising inflation, to do all it could to increase production. But what has this Government done? The Minister for Labour (Mr Clyde Cameron) is campaigning for a 35-hour week, which will cause a 12i per cent loss of production. The Government has led the way to an extra week's annual leave, which will cause a further 2 per cent drop in production. The new Conciliation and Arbitration Bill, recently guillotined through this House by the Minister for Labour, is certain to decrease national productivity still fur ther. If the Government were serious about controlling inflation, the first step would be to restrain sharply its immediate promises and its Minister for Labour.

To be fair to the Treasurer, I must say that he did point out that there is no simple cure for inflation, although some of the other measures he mentioned - such as revaluation of the Australian dollar, restraints on overseas borrowing and domestic monetary measures - really come under the heading of 'demand management'. Others, such as restrictive trade practices, can have no immediate effect. Tariffs, which were mentioned by the honourable member for Gellibrand (Mr Willis) and which could be helpful in controlling inflation, are very unlikely to be effective while the present Minister for Overseas Trade (Dr J. F. Cairns) remains in office. He has a very old-fashioned approach to the role of tariffs. He seems to think of tariffs merely as a means of protecting employment rather than as a means of encouraging the optimum use of resources. Only by encouraging the optimum use of resources can tariff changes have an effect on inflation. But that sensible approach seems to be against Labor Party dogma.

So, all we are left with, as far as the Treasurer is concerned, is prices justification. He made no mention of an incomes policy, although that is obviously central to a serious prices policy. The omission of an incomes policy is a clear indication that Labor Party dogma overrides serious economic considerations. This can be seen, in perhaps its clearest form, in the decision of the Prime Minister (Mr Whitlam) to reverse what seemed to be a clear decision at last week's Premiers Conference, namely, to investigate an incomes-prices policy. Now we are told by the Prime Minister that the investigation will not cover incomes or wages. I wonder why.

What can a prices policy achieve? The 'Economist' magazine recently pointed out, after a survey of a number of countries, that the presence or absence of price control had no noticeable effect on price rises. Why then is the Government proposing such a measure? Obviously it has attractive public appeal. Everyone wants incomes to go up, but no one wants price rises too. The Government says: Let us fix prices and then all our problems will be solved'.

When one asks how increased costs are to be absorbed, the answer given is: 'Out of profits'. This ignores the fact that many costs that press on low income earners are not the result of profits. Rates and transport and electricity charges, all of which services are nonprofitmaking, are good examples of this. Even the absorption by profit-making companies of greatly increased costs may and probably will be against the public interest. Our profits, particularly in manufacturing industry, are low by international standards, and any further reduction of profits would cripple new investment, on which our future prosperity depends. For example, the failure of the recent price inquiry to grant the Broken Hill Pty Co. Ltd an appropriate price rise to cover increased wage costs has caused a sharp reduction in plans for new investment in steel making. The Australian community will be the loser in the long run. Another argument which has been advanced in favour of the Prices Justification Tribunal is that wages are controlled and therefore prices should be controlled. This is absurd. Wages are not controlled. Only minimum wages are controlled, and it is above-award wages obtained by unions ruthlessly using their monopoly power that are the dominant cause of cost-push inflation.

Nevertheless, short-sighted though it may be and inadequate though it may be, the Government does have an effective mandate to set up a Prices Justification Tribunal and it would be wrong of us to frustrate this, although we believe that in its present form it will be futile. How should such a tribunal operate? It will cover only the 400 or so biggest companies. But these have many thousands of individual products. One has only to look at the number of products sold by a firm such as Myer Emporium Ltd to see the scale of the problem. The only basis on which such a tribunal could operate is, one way or another, control on profits. The greatest difficulty for the Tribunal will be the pricing of new products. One of the reasons why price control worked reasonably well during World War II was that there were few new products then coming onto the market. Now there are many new products. If we are not careful we will have all our industry working on a cost-plus basis with no incentive to improve efficiency. This would be a disastrous consequence of a muddle-headed decision by this Government. I believe that one of the most important roles the Tribunal could perform would be educational. The British Prices and Incomes Board published reports of 30 to 40 pages on important cases, examining the issues involved in depth. I hope that our Tribunal will do likewise. Also, the activities of the Prices Justification Tribunal will cover many of the activities of the Monopolies Commission proposed by the previous Government. If there is both a Prices Justification Tribunal and a Monopolies Commission there is bound to be buck passing, duplication of investigations and duplication of scarce staff, as well as unco-ordinated policy making.


Mr Bury - Two fat bureaucracies.


Mr HAMER - Two fat bureaucracies, each competing for scarce staff. I believe that the responsibilities of the Prices Justification Tribunal should be extended to cover the responsibilities of the Monopolies Commission proposed by the previous Government. In my opinion, the Tribunal could also usefully deal with foreign takeovers. I put those suggestions to the Treasurer.

Sitting suspended from 12.59 to 2.15 p.m.


Mr HAMER - Before the suspension of the sitting I had pointed out that incomes were an integral part of any serious prices policy and also that the complexity of the problem facing the Tribunal made it very probable that the economic effect of the Prices Justification Tribunal would be to make Australian industries work on a cost plus basis with no incentive to improve efficiency.

Whether or not trade unions and wages are the cause of inflation, the indisputable fact is that wage restraint is necessary if the rise in prices is to be slowed down without massive unemployment. In one of his typically inept interventions in economic policy, the Minister for Labour has publicly advocated that a reduction in working hours should be granted in industries, as the Minister expressed it, which are able to afford it. In view of what we are discussing today, it is ironic that the oil industry, which is the Minister for Labour's first target, has been subject to price control for its major products for many years. The South Australian Prices Commissioner sets maximum petrol prices throughout Australia. If, indeed, the Minister for Labour is right, and the oil companies' profitability is excessive, surely it would be better for prices to be reduced so the whole community - including the workers - benefit, rather than all the benefits being passed on to a very small group of trade unionists. But that sensible solution again seems against Labor Party dogma.

For the time being, the Arbitration Commission must remain the main source of wage policy, and despite the strong hints of the Minister for Labour, it must seek to balance the public interest in industrial peace with the public interest in avoiding inflation. The fact that the Commission's function is to prevent and settle interstate industrial disputes does not mean that it should ignore the possible inflationary impact of its decisions, since inflation is a main cause of the disputes it is meant to prevent. The Constitution, however, only confers on the Commission the power to arbitrate disputes. In other words, if employers and employees agree on wage increases, as they have increasingly done in collective bargaining, the Commission is powerless, except by refusing to register or certify such agreements or endorse them as awards. It had this power under the previous Government's Conciliation and Arbitration Act, and has retained it, in a regrettably watered down form, in the Bill we have recently passed.

Some people regard all collectively negotiated wage agreements as a bad thing. This is quite wrong. Birt some important agreements may be against the public interest. I would like to see the Arbitration Commission use its power and refuse to register those agreements it disapproved of. For example, because of their excessive size; because of the need to avoid inflation; or because they pre-empt a national wage case decision, as in 1971. The problem is to decide what the public interest is. The term 'public interest' has never been really defined. I think, in this field, it can be met by laying down what average wage increases the economy could stand without excessive inflation. The Commission would therefore need to be given public economic guidance by the Government, as the representatives of the public interest, on what average level of wage increase would be within the public interest.

If the Commission refused to register a wage agreement, then the Prices Justification Tribunal, in my opinion, should refuse to allow it as a cost to be passed on in higher prices. Similar criteria might be applied to salaries which rise, on average, faster than the target laid down by the Government. Incidentally, there is much evidence that salaries are rising substantially faster than wages. This suggestion of not allowing such unjustified costs to be passed on is an alternative to the proposal I made in this House 2 years ago to use the income tax system for this purpose. But the Government must accept the consequences of such action. If the Arbitration Commission refused to register a consent award as being against the public interest, and the employers therefore refused to pay it, the Government would have to be prepared to indemnify the company financially against the consequences of a resultant strike. Otherwise no highly capitalised company can resist excessive wage demands. Look at an airline. A strike costs an airline probably $30,000 a day. How could it be expected to resist a threat of a crippling strike by a small group of employees, however unreasonable their demands? Of course they give in - and the country is the loser in the not-too-long run.

I hope the Government will revise its present policy and try to strengthen the Arbitration Commission's role as an instrument of national wage policy, rather than to dismantle it. We have a great history of reasonable wage justice, and establishment of fair wage differentials, If the Government and Prices Justification Tribunal were prepared to act in the way I have proposed, it would not result in a perfect incomes prices policy, but it would at least be a start. What this Government is proposing is a half-hearted attempt at such a policy. The Government is a sectional party - it describes itself as the political arm of the trade union movement - and it is prepared to submerge the interests of the community as a whole before the sectional interests of its members. Inflation is a great problem. The Government, by its inept policies, is making it much worse, and its countermeasures are feeble, doctrinaire and ineffective.







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