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Tuesday, 30 November 1976


Mr MALCOLM FRASER (Wannon) (Prime Minister) - Mr Speaker,the honourable member for Adelaide (Mr Hurford) was at pains to point out that he had asked to speak for 20 minutes, and 20 minutes alone. He then went on to say that the economy is not a box. We are not surprised that he asked to speak for 20 minutes only. Mr Speaker, when the Leader of the Opposition (Mr Whitlam) spoke he had forgotten many of the things which he had done. He quite clearly had forgotten the statement that he made on 25 September 1974 on the devaluation of the Australian dollar. At that time, he emphasised that: the depreciation will give a fillip to many domestic industries. Export industries such as rural and mining industries, and manufacturing exporters will benefit particularly as will those sectors of industry experiencing undue pressure from import competition.

The Leader of the Opposition stands condemned by his own earlier statements. He also indicated that there would be no gain to the sugar industry in relation to these matters. The gain estimated by officials in 1976-77 is $25m and in the next 3 years it is estimated to be as much as $53m a year. Those facts again show that the honourable gentleman is exceedingly careless of his facts.

The honourable gentleman sought to recall some history in relation to some of these matters. I think it is worth noting the circumstances which at an earlier time led up to the events of last year. A note was published in a recent book. It has not been denied. It is of such substance and importance that I imagine, therefore, that it was correct. That note was directed to the then Treasurer, the honourable member for Melbourne Ports (Mr Crean), on 10 December 1974. It is signed 'J. O. Stone'. In that note he drew attention to certain legal and technical aspects of proposed raisings overseas about which Treasury had not been consulted. He said:

Standard borrowing procedures for the Australian Government involve before any commitment is given, establishing:

(i)   identification of principal (through channels of our choosing);

(ii)   availability of funds must be proven;

(iii)   cost of funds to borrower must be competitive;

(iv)   documentation must satisfy us and AttorneysGeneral; and

(   v) offer must satisfy the Loan Council.

What grounds are there for neglecting these fundamental safeguards?

In their absence, how can there be certainty that the proposition is genuine or can be consummated satisfactorily?

Would not a decision to proceed on the basis of presently available information expose the Government to grave risk of charges of imprudence?

What a gentle word that was. The note continues:

How can Loan Council aspects be resolved until the precise nature of the arrangement is settled?

Next comes the most critical paragraph of all:

Even if the borrowing can be arranged to avoid Loan Council procedures, funds could not be on-lent to the authorities without Loan Council approval.

That was signed by 'J. O. Stone' and was dated 10 December 1974. An honourable Treasurer was sacked the next day. He obviously used that note by taking it to the then Prime Minister. There is no responsible parliamentary term which will adequately describe what that Prime Minister and his Government were then doing. It is so false for that former Prime Minister to talk of responsibility and to come in here today with piety in his eyes and a gentleness in the use of his tongue. Whenever there is an opportunity for the Australian people to cast a vote they will have to look only at the present Leader of the Opposition to know where they will cast their vote on a ballot paper.

The honourable gentleman spoke of a deep sense of national responsibility. Does he remember that it was he who was illegally going to by-pass this Parliament and to compel the trading banks to finance his Government and his illicit and illegal moves, by robbing the people of their savings in those banks? He said that he was approaching economic matters in a spirit of goodwill. But he has not learnt anything. He advocates that we should spend more- spend more, that is, of other people's money. But he does not say where that money will come from or how that expenditure will be paid for. He praised the proposals of the Tasmanian Premier and of Mr Wran. But the Whitlam plan involved $ 1,000m in expenditure. The Wran plan involves expenditure of $2,000m. Has the Labor Party learnt nothing at all? Do these people not know that we cannot spend our way out of this kind of problem?

What the Leader of the Opposition has done and said on this occasion surely are a sign of desperation. Much worse than that and more tragic for the people of Australia is the fact that his proposals are a sign of having learnt nothing at all from the sad tragedy of all the errors of his Government. We think of the 3 Treasurers he went through, one after another, very quickly, as he sought to blame them for his problems. He sacked a Treasurer for upholding propriety in the affairs of this country.

Members of the Opposition and some of yesterday's men who aspire to sit among them have criticised the decision to devalue. Their statements are as hollow as their attempts to manage the economy were disastrous. They, more than any other group, bear responsibility for the condition of the economy. The Leader of the Opposition, whose numerous attempts to raise money from Arab money lenders, which continued after 20 May despite his deepest protestations- mysterious Iraqis at breakfast in strange places- are well known to all of us, has seen fit to enter once again the field of international finance. His comments will persuade all of us who know the intimacy of his involvement in international affairs and the acuteness of his judgment in this area. There is no man in this Parliament who has done more damage to the lives of Australians than the Leader of the Opposition, by his sheer incompetence in economic affairs.

His was the Government which performed the almost unbelievable trick of stoking one of the worst rates of inflation in the Western worldand domestically caused, not internationally caused. His was the Government which boosted unemployment by almost 200 000 in one year. What a great government! What concern, what passion for the disadvantaged did that show? He was the man who sacked Frank Crean to make way for the disastrous loans search- who sacked honesty out of his Government. His was the Government which ignored the most authoritative warning from one of the top officials of the Treasury in this matter. His was the Government which sought to rob the people 's savings because the Parliament denied Supply, using the proper constitutional powers of the Parliament. His was the Government that defied centuries old tradition by seeking to govern without Parliament's approval for money. That is the first massive step towards the establishment of a dictatorship. That is why the people rejected him and will leave him rejected. His was the Government which made a virtue of massively increasing wage costs for Australian industry.

For a few short moments in government last year he recognised the impact of wages on inflation. In January last year he stated:

Wage claims in the past 12 months have so greatly reduced the profitability of employers that they have ceased to employ . . . Every excessive increase in income for one man takes the job of another.

What has happened to this short lived apostle of restraint and common sense? To protect his political flanks he has now aligned himself irrevocably with the left wing extremists of the Labor Party and the trade unions. He has refused to accept a responsible national role. He has aligned himself with those who seek to undermine recovery by excessive wage claims and by political strikes. He has learnt nothing about economics. In October he proposed a 5-point plan which would add $1 billion to the deficit. He inspired the Premier of New South Wales to add nearly $2 billion to the deficit. The Labor Party still clings to the discredited policies that produced Australia's unemployment and inflation. Even blind Freddie and his dog know that the Leader of the Opposition, his supporters and others have played an equally destructive role.

That self-fulfilling prophet, the honourable member for Oxley (Mr Hayden), has also participated in these irresponsibilities. He is well known for his sense of responsibility and his great commitment to the national interest. I hope I do him no harm. He has always shown a deep and continuing public interest in the exchange rate. The further he is moved from the Treasury, the greater his interest has become. During the election campaign last year he made the statement that devaluation would occur if the Liberal-National Country Party Government were returned. This fuelled speculation against the dollar. After all, he was the immediate past Treasurer of Australia. In the Christmas and new year speculation following the election, Australia lost in excess of $600m in reserves. He was joined on 9 February by the shadowy shadow Treasurer who tried to provoke another devaluation scare. The honourable member for Oxley decided to wait until 7 December to announce before an audience of undergraduates at Melbourne University that Australia would have to devalue by 1 5 per cent. The audience might be regarded as a particularly appropriate one, except that I have no doubt that undergraduates would have demonstrated a greater sense of responsibility and a greater regard for Australia's national interests than the honourable member for Oxley, a former Treasurer in the Australian Parliament.

The honourable member for Oxley 's grossly irresponsible statements were widely reported. They were noted overseas. They led directly to a weakening of reserves. He is a man devoid of a sense of national responsibility in this matter, a member of a Party which has done immense damage to Australia in recent years. The Opposition's other leading spokesman on economic matters, the Deputy Leader of the Opposition, has persistently pursued questions in Parliament about the exchange rate and the loss of reserves. On 11 November, showing the same sense of national responsibility that distinguished Labor in office, the Deputy Leader of the Opposition described Australia's position as disastrous.

I should mention in passing Mr Hawke 's response to the devaluation decision. I do this because Mr Hawke 's support for the Opposition leadership is second to none and is much to be admired, although his support for the Leader of the Opposition is perhaps exceeded by that of Dr Cairns or Clyde Cameron. In 1974 Mr Hawke welcomed the Labor Party's decision to devalue because it went some of the way towards giving protection to industry. In 1976 he criticised the Government's decision and states that the trade unions would demand greater wage increases.

Different circumstances; different statements. He thus seeks to perpetuate the situation of excessive wage demands, which undermine Australia 's international competitiveness, to unemployment and to inflation. The Labor Party should be proud of Mr Hawke 's loyalty. Perhaps the Labor Party would even reconsider its decisions and offer him a seat. Whose will it be? The unemployed, the vast majority of union members who recognise the grievous damage his actions are having on Australia's economic recovery may justifiably ask whether Mr Hawke can continue to wear the 2 hats which he seeks. Is he really concerned for the unemployed, or is he concerned only about another job for himself?

This devaluation shows that rising internal costs have eroded our competitive position in the world. It is a warning of a weakness in our national economy which will take a total national effort to correct. Throughout this year we have acted to maintain a balance between the 4 arms of national economic policy- budgetary, monetary, external and wages policies. When we came to office we were faced with an over-valued currency which placed great burdens on particular groups in the community- manufacturers, primary industry and import competing industries. A case could have been made for devaluation at that time. We did not act because it was essential that other arms of policy be brought to bear or focus on inflation. We maintained the exchange rate and tightened other arms of policy. We pursued stringent budgetary, monetary and wages policies. The Government cut spending, moved to control the growth of the money supply and argued strenuously for restraint. The Government has always recognised the dangers inherent in the declining competitive position of Australian industry. Recent events have placed too heavy a pressure on the external arm of policy. The Arbitration Commission's decision to pass the full CPI increase for the September quarter into wages further exaggerated Australia's internal costs. The maintenance of unrealistic wage levels has placed Australia's import and export competing industries at risk. It has also delayed the emergence of employment opportunities. It has not been sufficiently recognised that continuing to run an over-valued exchange rate has been unfair to employees and those seeking work, because the capacity of industry to provide jobs has been inhibited.

Uncertainty about the exchange rate resulting from the decline in Australia's competitiveness has been impeding the implementation of new investment proposals. It has resulted in a continuing decline in Australia's international reserves. In the last 12 months, despite substantial overseas borrowing by the Government, international reserves fell by $1,1 00m. The loss of reserves accelerated in the last few months-$269m in October and $260m to the 26th of this month. The prospect of an unacceptable outflow of capital in December and early January was imminent. Last Thursday the Government's official advisers jointly presented 2 options to handle this situation. They were further international borrowings of around $ 1,000m, going into hock to the International Monetary Fund, or devaluation.


Mr Innes - For which one did the advisers opt?


Mr MALCOLM FRASER -Does anyone in this Parliament suggest that they would opt for a borrowing of $ 1,000m? I could understand the Opposition doing it. It was prepared to borrow $4,000m from Khemlani. But so far as this Government and these Parties are concerned, there was only one responsible choice, faced with those options. Devaluation was the only responsible option open to the Government.

The Government has consistently argued that wage restraint is an essential element in economic recovery. At the present time one man's wage increase is purchased at the cost of his workmate's job- shades of the honourable member for Melbourne Ports. Wage increases in this context are counter-productive. They fuel inflation, increase unemployment and reduce spending. Look what happened under our predecessors. In 1974, between the March and December quarters, average earnings increased by 24 per cent- in real terms by 10 per cent. But what happened? Consumption went up by less than 1 per cent and inflation went up by 13 per cent. The wage increases accelerated inflation, accelerating inflation increased consumer uncertainty, consumers spent less and unemployment rose.

It is only common sense that the country cannot continue to pay higher and higher wages that greatly exceed productivity increases without this leading to higher inflation and increased unemployment. There is no doubt that the Arbitration Commission's decision has worsened the chances of economic recovery. There is great doubt that it will affect the industrial relations situation. I find it an odd circumstance to pay people not to strike when strikes ought not to have occurred in the first place, and that in a sense results from the kind of choice that was made. The threats of a number of union leaders to cause further disruption have been taken to depict the view of the majority of trade union members, and admitted economic common sense has been set to one side. But what does this say for Australia? Those in leading positions in every sphere of life, in every institution, should apply what they know to be common sense and not pander to the extremist statements of a vocal minority who are actively seeking to undermine economic recovery for their own partisan purposes. We simply cannot maintain a situation in which the rate of increases in Australia's wages outstrips that of its major trading partners. What is needed here is an opportunity to test the great common sense of the overwhelming majority of Australian people in these matters. People in positions of authority ought to have some faith in that, and they should not merely listen to their sometime leaders who do not depict the views of the majority.

Over the last 6 years wages in Australia's manufacturing industry increased by 130 per cent compared with 53 per cent in the United States of America and 70 per cent in West Germany. Is it any wonder that manufacturing industry is in difficulty? It is only common sense that Australia is harmed by the level of industrial disputation frequently motivated by purely political considerations. Again the figures of the Organisation for Economic Co-operation and Development show that in 1975 Australia had the world's third worst record in industrial disputes. This was a year in which Labor was in office. This year, if Medibank stoppages are excluded, the record is better, but industrial disputes are still far too numerous.


Mr Young - Why do you exclude Medibank?


Mr SPEAKER -Order! The Prime Minister will resume his seat. The honourable member for Port Adelaide continues to interject. He is also out of his place. I would ask him to return to his place and not to interject.


Mr MALCOLM FRASER -There is sometimes advantage in honourable gentlemen being able to speak out of their places because it allows others to understand what they are. The vast majority of union members do, I believe, recognise the irresponsibility of the minority of extremist union bosses. Some of these men are quite explicitly seeking to destroy our social and economic system. Others are attempting to squeeze the last drop of advantage to themselves, regardless of the consequences for the economy as a whole. These men have no difficulty in mouthing the words of social responsibility while they systematically drive more and more of their fellow unionists into unemployment. What kind of social responsibility is that?

The Government's intends to maintain- and to step up- its strong opposition to wage and salary increases which cannot be justified by economic conditions, and to the disruptive activities of a few irresponsible and extremist union leaders given too much support by the Opposition, where the Opposition should at least seem to have some degree of responsibility. I believe that in taking these stands we have the support of the Australian people and of the great bulk of rank and file trade unionists, We would be shown to have the support of rank and file trade unionists if they were only given the opportunity freely to express their views and not have their decisions pre-empted as their decisions were preempted by the Premier of New South Wales and the President of the Australian Council of Trade Unions in respect of shipbuilding a few days ago. They did not want the blokes in Newcastle to have a fair opportunity to judge that industrial relations contract.

Our secret ballot legislation has given reasonable rank and file unionists, who in our view are in the overwhelming majority, the means by which they can exact responsible action from their union officials. The union movement and the Australian Labor Party share with other Australians a responsibility to advance Australia's economic recovery, not wilfully or carelessly to undermine it. This devaluation can be a major help in moving Australia further along the road to economic recovery, provided its effects are not eroded.

The competitive position of manufacturing industry competing with imported goods will be strengthened, and the benefits of this will flow on to all those dependent on a vigorous manufacturing industry, including many of those now unemployed. The disastrously depressed farming sector, the gravity of whose position is often underestimated, will obtain an improved position in world markets. Investment projects which have been deferred can now get under way with their job and income creating potential. Mining and exporting industries generally, which make such an important contribution to Australia's prosperity, will now have their position considerably strengthened.

The prosperity of these sectors is vital to us all and the flow of benefits will spur recovery provided that they are not frittered away. These effects, however, will not be long sustained if appropriate action is not taken with respect to other arms of economic policy- budgetary, monetary and wages policy. Appropriate balance between the various arms of policy- budgetary, monetary, external and wages policy- has been maintained by what we have done. They must be kept in balance by each section of the community accepting its fair responsibility in the fight against inflation. The fight against inflation is a battle to which everyone must expect to make a contribution. It cannot be won if the burdens are distributed inequitably across the community or only amongst a few groups. Equally, it will not be won if there is not an end to the selfish pursuit of advantage by different groups in the community. The fight we are involved in now is not a fight for one group, one section of the Australian community; it is nothing less than a fight for Australia's future in which every Australian must be involved. Let us have a commitment by every Australian to make a personal contribution to getting Australia back to full economic health.

Australia has a government committed to a strong private sector as the foundation of a decent life for all Australians. Business must be prepared to commit resources to the future of this country, knowing that it will get full and equitable consideration in Government policy. Trade union members must be prepared to see that their officials act responsibly and reflect the broad recognition of the need for restraint in wage and salary demands. Every Australian can make a contribution by a personal commitment to make Australia a country of which each one of us can be proud. Unless there is such a commitment, we will watch a country with enormous potential waste itself in the destructive pursuit of personal and sectional advantage.

On the night of the Federal election last year, on 13 December, I said that we were determined to be a Government for all Australians. Our economic policy that we are pursuing reflects that determination. Now is the time for all of us to work together to build the kind of Australia we all want this country to be.







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