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Wednesday, 17 November 1976

Mr NEWMAN (Bass) (Minister for Environment, Housing and Community Development) - I was surprised to hear the honourable member for Corio (Mr Scholes) begin his speech by reminding me that I came into this House in June last year because of the previous Government's economic policies which almost destroyed the economic community in the electorate of Bass in which I live. Probably it is necessary for me to go even further and to remind the honourable member what the economic circumstances were then and, I might say, which still existed in December 1975 when the previous Government was swept out of office at the national election. It was at that time last year that Australia was suffering from probably its most serious postwar recession, with consequent record unemployment. Prior to the general election in December 1975 we argued that economic recovery would take a full 3-year term. Immediately we came to office we began the long haul to fulfil that promise, that is, to bring economic recovery to this country. The honourable member is correct in necessarily acknowledging that the whole thrust of support to regional centres must depend on the Government's general economic policy. It might be desirable to go through that matter, to begin with.

As the Treasurer (Mr Lynch) has made clear on many occasions, the thrust of our policies is to achieve single digit inflation by the end of this financial year. We must recognise that inflation and unemployment will not be wiped out overnight. As the Treasurer said on Budget night: . . even on a not over-optimistic view of things they will be steadily reduced by the budgetary and other policies to which this Government is adhering.

If we can achieve this- I am confident, and the whole Government is confident, that we willthen the economic circumstances of people throughout the country, not just in regional areas, will return to the prosperity which they enjoyed before the Labor Government did so much to destroy our national economy.

In February the Commonwealth Government sought to bring home to the Conciliation and Arbitration Commission that full wage indexation, by locking the economy into double digit inflation and a disaster level of business profitability, ran completely counter to hopes of sustained economic recovery and a return to full employment. The Arbitration Commission's decisions of May and August in respect of wage adjustments for the consumer price index movements in the first 2 quarters of 1976 held out hopes for some further moderation of inflation during the remainder of this year. Much depends on the decision of the Conciliation and Arbitration Commission in the current wage hearing.

I should like to examine some of the ways in which the Government has moved to restore economic prosperity throughout this countrynot just in the cities, not just in the rural areas and not just in regional centres, but throughout Australia as a whole. It is beyond dispute that the enormous damage was done to the economy because of the explosive growth of wages which beset Australia in late 1973 and accelerated in mid- 1974. It is instructive on occasions such as this to compare developments in wage costs in Australia with those of the United States of America which, of course, is the centre of gravity of the world's economic system. From 1968 to 1973 the consumer price index rose in Australia at an annual rate of S.3 per cent and in the United States of America at an annual rate of 5 per cent. But in 1974 and again in the first part of 1975 wage costs in Australia escalated dramatically. The recent wage explosion in Australia is out of character with the earlier Australian experience and also is out of character with developments in the United States. It simply cannot continue if Australia is to have any hope of getting back to reasonable stability in the economy. Recent evidence suggests that some progress has been made in winding back the excessive rate of wage escalation in the economy; but it is clear that further progress must be achieved on this front.

Wage restraint, however, represents only one facet of the Australian Government's antiinflationary strategy. In the Budget the Treasurer indicated that restraint on Commonwealth Government expenditure and on the size of the public sector is necessary to allow for that expansion of the private sector to which we are committed. There is no doubt that under Labor the private sector had run down dramatically. At the end of 197 5 the private sector was employing no more people than it had been employing 3 years earlier. The Government therefore moved to restrain growth in government expenditure. In 1976-77 Budget outlays are expected to increase by 1 1.3 per cent over actual outlays in 1975-76. Let us compare this with other figures. In 1975-76 the increase was almost 23 per cent and in the year before it was almost 46 per cent. These figures indicate the extent to which the Government has restrained growth in Budget outlays.

I deal now with taxation concessions. In doing the things I have outlined, the Government has matched restraint in its own spending with a number of important taxation concessions. The important key element of this strategy has been the introduction of full personal income tax indexation which was announced by the Treasurer on 20 May and which came into effect on 1 July. It represents what is perhaps the most significant reform of the personal tax system in our time and certainly the most costly in terms of revenue forgone. Indeed, the cost of tax indexation is estimated to be close to $ 1000m in this financial year. In addition, it was announced in the Budget that the Government had decided to take a substantial step in relation to a system of trading stock valuation adjustments applying to taxable incomes earned in the 1976-77 income year. This scheme, which will be phased in, will help to relieve businesses from the impact of inflation on their tax burdens. Legislation to be introduced in the present parliamentary sitting will provide full details of the scheme.

The honourable member for Corio alluded to small businesses. I agree with him in saying that they are very much a part of regional life and of the success of regional centres. They will benefit from the Government's decision to ease the distribution requirements for private companies under the Income Tax Assessment Act. The essential point of aU this is that the restriction in the expansion of Government expenditure has enabled the Government to bring in confidence strengthening measures designed to boost the private sector. To do this priorities have had to be determined. It is tougher to determine priorities than it is to administer easy handouts. But in the present economic climate tough decisions have to be made if this Government- if any government- is to act responsibly.

The Labor Government argued that it was possible to spend oneself out of inflation. I suggest that is really what underlays the argument put up by the honourable member for Corio. All the evidence indicates that under the kind of inflationary conditions which we have been and still are experiencing 'pump priming' will only increase unemployment. Experience in the United Kingdom and elsewhere has demonstrated also that governments cannot spend their way out of recession when prices and costs are increasing rapidly. Though there is slack in the Australian economy at present- some of it does show up in the regional areas- further large increases in government spending and, consequently, in the deficit will not take up the slack on a sustainable basis. In the very short term such spending might have a positive effect on activity. In a short time, however, that effect would peter out and we would be left with the price effects. Inflation would take off again, with adverse implications for investment, consumer spending and employment.

The recently released consumer price index figures indicate that the broad thrust of the Government's policy is beginning to work. Compared with the June quarter the all groups index for the average of the 6 State capital cities increased by 2.2 per cent. This compares with 0.8 per cent registered in the September quarter of 197S, which was artificially low because of the introduction of Medibank. The increase for the 12 months ended in September 1976 was 13.9 per cent, compared with 12.3 per cent for the 12 months ended in June 1976. Unemployment was mentioned by the honourable member. Of course, unemployment remains a very serious problem. We recognise that. But it will only be defeated when inflation is reduced and economic prosperity returns. Those who, like the honourable member for Corio, in the name of reduced unemployment call for higher Federal Government spending or bigger deficits or full wage indexation are unintentionally calling for even higher unemployment in this country.

We heard from the honourable member about the problem of youth unemployment. The Government recently announced 2 policy initiatives designed to alleviate the problems faced by unemployed youth. In addition, improvements have been made to the National Employment and Training scheme. Unemployed school leavers who have not been able to obtain stable employment will now be offered the opportunity of 6 months on the job training for employment under a special program. A community youth sports scheme has been introduced also. This will provide financial assistance to community groups, including recognised youth organisations, for supportive programs and services to the unemployed.

The honourable member mentioned the relocation scheme. I do not believe it is true to say that necessarily it is directed towards moving people to the cities. It is directed towards overcoming the employment difficulties of unemployed persons, wherever they may be, who are unable to secure continuing employment in thenpresent locality and /or who are without prospects of doing so even after retraining. This scheme will provide financial assistance in relation to fares and removal expenses to places of employment, wherever that may be. Let us look at some of the specific measures the Government has taken to assist regions or areas. In the case of rural regions, primarily dependent on rural production, the Government has made a consistent effort to ease the impact of the long term decline in the primary sector. It has begun to introduce a number of rural reconstruction measures on most generous terms. Currently, there are 4 ways in which the rural sector receives publicly funded adjustment assistance. These are the rural reconstruction scheme, the dairy adjustment program, the fruit growing reconstruction scheme and the Commonwealth Development Bank. The Government has adopted the view that people engaged in rural industries should be entitled to the unemployment benefit. It is a fact that Government assistance to the rural sector is higher now than it ever was under the previous Administration.

The Government has taken major steps to promote the development of mining. Generous taxation concessions have been granted to encourage development and these are already having an effect. Australia's major centres will benefit from these decisions. Expansion can be expected in the main coal mining regions, where the development of new fields will boost employment. Oil and gas exploration will be stimulated and iron ore production will also benefit. The centres depending on these industries will benefit significantly. These include the Bowen Basin, the New South Wales coal fields, the iron ore and other projects in Western Australia, including the North- West Shelf, and many smaller centres. Newcastle, Wollongong and regional centres such as Gladstone and Mackay will be better off as the mining industry responds to the Government's measures.

The honourable member for Corio (Mr Scholes) specifically mentioned the manufacturing industry. The Government's industry policy for manufacturers specifically recognises regional problems. The Government has provided an important stimulus to the Geelong region by means of its motor vehicle assistance policy. In the light of that policy, as the honourable member well knows, the Ford Motor Co. of Australia Ltd has announced a major investment program for its Geelong plant. Borg Warner (Australia) Ltd, one of the main employers in the Albury-Wodonga area, has also benefited considerably from the Government's policy in this area. If it had not been for the Government's revisions of the local content plan, this company would have had difficulties in maintaining its Albury-Wodonga operation.

Mr Scholes - You wiped out the nonreversion provision. You took it out and then put it back.

Mr NEWMAN - The recent announcement by the Prime Minister (Mr Malcolm Fraser) on the shipbuilding industry indicates the Government's concern regarding the regional implications in that industry and the willingness of the Government to negotiate a satisfactory solution. It is absolutely hypocritical for honourable members opposite to be criticising the Government for the problems in the Newcastle and Whyalla areas. The level of subsidy currently being provided is that which was determined by the former Labor administration. It is simply hypocritical for honourable members opposite to complain about the level of assistance for the shipbuilding industry when it was the former Government which introduced the current scheme under which this Government is labouring.

I refer specifically to the decentralisation policy which the Government is beginning to develop. On S November I announced that the Government had decided to continue its support for growth centres. The Government is providing a total of $21m to assist Albury-Wodonga, $4m to Bathurst-Orange and $5m to Macarthur in this financial year. In the next financial year, the Government will continue to offer assistance to those centres on a matching basis. Although I indicated that no funds would be provided for Geelong or Monarto for 1976-77, I also indicated that Commonwealth support for these centres would be reviewed as the Government further develops its decentralisation policies. On that subject, the Government is presently considering what other measures it should adopt to assist State decentralisation development. Our review of decentralisation policies provides every opportunity for considering steps which can be taken to assist the development of country centres. However, it must be recognised that the States too have a part to play in the promotion of their decentralisation programs.

The Government will continue to take a very close interest in the economic welfare of regional centres which are of such importance to the nation's welfare. But these centres can only succeed when the national problem of economic prosperity is solved as well.

Mr Scholes -Mr Deputy Speaker,I claim to have been misrepresented.

Mr DEPUTY SPEAKER (Mr Lucock)BeforeI call the honourable member for Corio, I want to make one comment in regard to what was said by the Minister for Environment, Housing and Community Development (Mr Newman). The Minister was speaking to the matter of public importance and the honourable member for Corio interjected. The Minister said it was hypocritical for this matter to be raised and for criticism to be made. I took it that the Minister was referring to the matter in general terms and not to the honourable member for Corio as an individual. It was for that reason that I did not ask the Minister to withdraw the word hypocritical'.

Mr Scholes - I claim to have been personally misrepresented. The Minister stated that I had made certain statements about the motor industry and also that the present Government, by restoring the non-reversion clauses to the motor car plan, had saved Borg-Warner. The present Government removed the non-reversion clauses. They were in the plan when the Government came to office. I suggest that the Minister is not entitled to attribute to me or to the Labor Government an action taken by his Government, which then saw the error of its ways and reversed that action.

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