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Thursday, 2 December 1976


Mr YOUNG (Port Adelaide) -Before commencing to comment on this Bill let me just say that the Opposition is becoming perturbed at the manner in which the administration of legislation is being handled in this House. For the third time in as many weeks the Opposition has been asked to break the normal procedures in dealing with legislation in that it has had to deal with amendments that have come into this House late, well after legislation has been presented. It ought to be understood that there has been some sort of convention about allowing an Opposition at least one week to look at the way in which governments will deal with legislation. In the case of the conciliation and arbitration legislation, the Aboriginal land legislation and now the legislation to amend the Prices Justification Tribunal Act we have been forced to consider amendments that have reached us very late in the legislative process. The Opposition registers its protest at this method of application because, as in the case of the 2 other pieces of legislation that I have mentioned in respect of which amendments were given to us late, the proposed amendments to the Bill before us are quite considerable in the intent of the way in which they propose to amend the Act.

I think that the Government should be able to tidy up its method of dealing with these Bills and that the Opposition should be given the legislation in toto. If the legislation is not prepared properly and is not ready to be given to the Opposition it should be delayed until such time as it is complete. If this practice is adopted our committees will be able to deal with all the matters that will come up for debate. The Opposition was given the proposed amendments to the Prices Justification Amendment Bill yesterday. Opposition members who will follow me in this debate will deal with the ramification of those amendments. I will be dealing mainly with the effect of the social contract that may have been in existence in Australia prior to this legislation being introduced into the House.

This Bill is opposed by the Opposition. The Government seems intent on hoisting on Australia some massive dose of economic madness. Whilst in the process of hurling abuse at the Commonwealth Conciliation and Arbitration Commission the Government brings into this

House legislation which in essence draws the teeth of the Prices Justification Tribunal. Devaluation will bring greater pressures on the wage and salary earners to attempt to keep up with massive price increases which will follow as a result ofthe increased price of imported goods. I ask the Minister for Business and Consumer Affairs (Mr Howard) and the Government to explain how any social contract will continue in this country under such conditions?

I want to pay some attention to the devaluation that has taken place subsequent to the introduction of this Bill. It is a pity that the honourable member for Wakefield (Mr Kelly) has left the chamber because I am sure that he would be taking an interest in the impact of the 17½ per cent devaluation upon the social contract, the inflation rate in Australia and the role of tribunals like the Prices Justification Tribunal in the present circumstances. I do not think that the impact of devaluation can be ignored in this debate. Instead of limiting the role of the Prices Justification Tribunal, whether it be in terms of staff, administration, public inquiries or whatever, the legislation should be extending the role enormously. We all should have learned the lesson of the tariff cuts that took place under the previous Government. At the time those cuts were made it was felt that considerable benefit would flow through to consumers in Australia. But we found that perhaps the importers were much smarter than the then Government in terms of marking up goods that were imported at the lower dutiable rate. Now we have the situation where, in Australia, we should have considerable stock which has been bought at the old price. But there will be an overlapping of the prices which should be paid now and the prices which should be paid on new goods which will have the 17.5 per cent added to the price, perhaps together with the freight rates which may be paid in some foreign currency, particularly United States dollars. As the Prices Justification Tribunal warned during the week, it should be given an increased role, a policeman's role, of seeing what will happen to consumers in this turnabout.

A prediction was made a few weeks ago by a colleague of mine. He has received great blame for devaluing the dollar. All honourable members on this side of the House consider that to be absolute nonsense. He said that blind Freddie and his dog could see that the Australian dollar was overvalued and that action would have to be taken. If I can use the same phrase, I point out that blind Freddie and his dog can see that tariffs will have to be reduced. It is absolutely incredible that the Government has made the announcement on devaluation without accommodating action being taken on tariffs. While industries around Australia are perhaps welcoming this additional protection which has been given to them, they know as well as anybody else inside or outside this Parliament that they could not possibly go to the Industries Assistance Commission and seek that type of additional protection under normal circumstances.

It is absolutely astounding why the Government has to make these decisions apart from each other- why this cannot be done in a package. The spin-off in not reducing the tariffs is, as we have seen demonstrated in the House this week, the belief that the Government by some magic wand will be able to convince the Conciliation and Arbitration Commission and the Australian Council of Trade Unions that everybody should ignore the increased inflation rate which will occur in Australia because of devaluation and with no action being taken or tariffs. There are people with better knowledge than I in relation to the economic system which will apply in Australia over the next 12 months who say that under present circumstances devaluation could possibly add 4 per cent to 5 per cent to the expected inflation rate in this country. Are we to believe that the Government will convince the Arbitration Commission that the increased cost of living which has been bestowed on wage and salary earners in Australia through the increased cost of goods will be ignored, that the wage and salary earners have to take this drop in the living standards to overcome the problems? The answer is: Obviously not.

If action is not taken on tariffs, if the Arbitration Commission is interfered with- perhaps in some subtle way this is inferred by Government spokesmen, particularly the Prime Minister (Mr Malcolm Fraser) and the Treasurer (Mr Lynch)- we will have either an enormous inflation rate in Australia or a great industrial confrontation in 1977. The Government must know this. When the right honourable member for Lowe (Mr William McMahon) led the attack in the Government party room yesterday, honourable members should have listened. What he was saying is correct. I draw attention to what the Government is expecting. This is why I draw this matter into the discussion on the Prices Justification Tribunal. As far as we can see this is relevant. The reason for setting up the Tribunal was to try to build some sort of social contract in Australia. If the wage and salary earners are to go before the Arbitration Commission to justify their prices increases, why should not the employers or the manufacturers go before the Prices Justification Tribunal to justify their price increases? It seems to me that Government supporters want the best of both worlds. They not only want the Arbitration Commission to ignore the justice in the claims for keeping up with the consumer price index but also want to take away from the Prices Justification Tribunal its overseer role in looking at price rises in Australia.

The action of the Government last week has only to be seen in the annual report ofthe Department of Overseas Trade for honourable members to understand what sort of effect it will have in Australia. The economist for the Adelaide Advertiser, Edward Nash, considers that imports could cost Australian purchasers or consumers an additional 22 per cent. If we look at the figures for the Department of Overseas Trade we find that in relation to the $8000m worth of goods which we import- if we add onefifth to that amount we take it up to almost $ 10,000m- we are asking consumers to bear the brunt of the additional cost of the present tariff level. At the same time we are saying that these people cannot be compensated through the Arbitration Commission. We are insisting that wage and salary earners go before the Arbitration Commission and we ignore the other end of the spectrum, namely, the justification of price increases.

Many matters are involved in the amendments which the Minister for Business and Consumer Affairs (Mr Howard) brings before us today. One should trace the history of the Prices Justification Tribunal. My colleague the honourable member for Melbourne Ports (Mr Crean), when he was Treasurer of this country in 1973, introduced a measure to establish the Prices Justification Tribunal and he made it quite clear then, as has been established subsequently in both speeches in this House and in the annual reports of the Prices Justification Tribunal, that the Tribunal was not established as a prices control body. Some people in Australia thought that it should have been. They thought that as far as possible we should have had a prices control body. But that is not why the Prices Justification Tribunal was established. It was established as a justification tribunal, pretty well along the same lines as the Wage and Salary Justification Commission.

Now we see that amendments are brought in to try, in some way, to have the representatives of the trade unions and the white collar organisations believe that the Government has not gone back on its word, following the election, not to abolish the Prices Justification Tribunal. That was the promise given to supporters of the Liberal and National Country Parties during the election campaign. It was promised that the Prices Justification Tribunal would be abolished. Immediately after the election the Prime Minister found it convenient to bargain and barter with the Australian Council of Trade Unions on the basis that wage indexation would survive and that the Prices Justification Tribunal would survive. We see these amendments being brought in which will virtually destroy the role of the Prices Justification Tribunal. We have also seen the word of the Prime Minister on wage indexation destroyed because the Government has continuously been before the Commission arguing against the continuation of wage indexation. So wage and salary earners- the vast majority ofthe people and their dependants in this countrymust understand that what they are being asked to do in the latter half of this year and in the whole of 1977 is to take a massive drop in their living standards to prepare the way for this Government to be returned in 1978.

One predicts with a certain amount of assuredness that this just will not work. It is absolutely impossible to do any arithmetic which will lead one to believe that the people of Australia will take a drop of 6 per cent or 7 per cent in their living standard during 1977. But that is what the Government is asking, if it is asking that the supervisory role of the Prices Justification Tribunal be taken away in looking at prices, in exposing price abuse, in holding public inquiries and in doing all those things which perhaps have had an impact on the ways in which these major companies carry on their business. The Tribunal has had a great effect upon those companies and upon the way in which they manage their business. It has meant that in many ways they have changed their procedures within the company in order to meet the demands ofthe Prices Justification Tribunal. Just as the investment allowance was a flop, in terms of talking about an economic recovery this matter will also be a flop. In the last week in particular this Government has gone mad. As I said earlier, we can expect another major decision on tariffs, otherwise the inflation rate and the cost of living in this country will soar. I shall cite, on some commodities, a few figures which were exposed in the newspapers during the week. Perhaps people do not understand what this Government is asking consumers to do. Twenty per cent of the motor vehicles sold in Australia are fully imported- that is, about 140 000 motor vehicles from overseas are sold in this country.

Let me point out the way in which the cost of living in this country will be affected. Not only will the price of imported motor vehicles jump by about 20 per cent but without the Prices Justification Tribunal it will be a fairly simple process for local manufacturers to lift their prices to near the mark of the imported product. That will be the spin off from taking away the role of the Prices Justification Tribunal. Let us have a look at some of these prices. The Chrysler Lancer, an imported car, which now sells for $4,386 will be $5,307 under the new valuation rates. The Datsun 260Z costs $8,909 at the moment and will cost $10,769. The Fiat 128 which is now $4,657 will be $5,634. The Peugeot 504 costs $9,189 at present and will cost $11,130. The Saab 99, which is a popular imported car, costs $10,401 and will cost $12,585. People can get some idea from those motor vehicle prices of what will hapen with all the other commodities. As I said, 8,000m worth of goods are corning into this country from overseas and, when the old stock runs out, they will be 20 per cent more expensive. That will mean a great hike in the inflation rate in this country. Obviously some action has to be taken in regard to tariffs.

The Prices Justification Amendment Bill cannot be seen in isolation. It must be seen in the context of the decisions taken by the Government in relation to the PJT in the 1976-77 Budget. This Bill must also be seen as the second step along the road to the announced Liberal Party policy of abolition of the PJT. The Lynch Budget sealed the fate of the PJT, the only price monitoring body in Australia. Salary appropriations were slashed by 10 per cent in real terms. Administrative cost appropriations were cut by 32 per cent in real terms. A deliberate policy was introduced to reduce further the number of inquiries undertaken by the Tribunal.

This Bill confirms the real desire of the big business supporters of the Liberal and Country Parties. They were the people who required the Prime Minister to pledge the abolition of the PJT in return for their financial support for the coalition in last year's election campaign. Now they have realised the effect that carrying out this pledge would have in industrial relations terms. They realise that it would demonstrate to all that what business wants in this country is to freeze wages and free prices and profits. The Tribunal itself in its recent annual report recognised these motivating forces. Acknowledging that it has been a natural target for criticism, it said on page 121:

Some of the criticisms did not go to the nature of the Tribunal 's operation, but appeared to be mainly motivated by sectional considerations.

These sectional interests, supported by the Government, have thus devised the indirect approach- slow suffocation rather than the immediacy ofthe guillotine. But the fact remains that the real intention of these amendments is to confirm the uneven 'social contract' which the Government is imposing on wage and salary earners. Side by side with the National Employers Policy Committee, the Australian Government breasts the bar of the Arbitration Commission to argue for a reduction in real incomes for wage and salary earners, while in the privacy of the boardrooms and in thinly veiled legislation such as this, business is advised that with profits and prices they can ' let it rip '.

This Bill is further evidence of the Fraser Government's willingness to bow to narrow sectional interests. It has done it for the graziers with the superphosphate bounty and for the doctors with Medibank, and now it is doing it for the wealthiest companies in Australia. On the question of devaluation, time and again we have been told that the mining interests and the exporting primary producing sections were carrying an uneven share of the burden in our economy. There are more people unemployed in Australia today than work in the mining industry. What about their share of the burden? What is happening about putting them back to work and doing something for them rather than worrying about the mining interests or some sections of the rural industries which we are told are carrying an unfair share of the burden?

There can be no doubt that the Tribunal has been successful in limiting price increases and there can be no doubt that this is the real reason for this legislation. The Federal Law Review in June 1975 declared that the PJT occupied a unique place in the development of Australia's legal and economic systems. The PJT itself estimated that it saved the Australian consumer $235m in its first year of operation. This is the answer to the spurious claim of the Minister for Business and Consumer Affairs that his amendments will allow the PJT to concentrate more on eliminating price abuse. The PJT has already dealt effectively with price abuse. There is no way known that it can be 'more effective' with a reduced staff, reduced funds and restricted terms of reference. The proposed changes may satisfy the whims of 1 per cent of the biggest companies in Australia, but they will not deal with price rises by the thousands of small businesses which live by purchasing goods and materials from large companies.

The Minister is dishonest in speaking of 'public submission' on the future of the Tribunal. The Government took submissions from the public when reviewing the PJT legislation but it has never made those submissions public. There is no evidence to support the Minister's assertion that most of the submissions sought changes in the Tribunal. There is no evidence of any duplication of functions between the PJT, the Industries Assistance Commission and the Trade Practices Commission. The IAC looks at the problems of industries as a whole; the PJT looks at particular companies. The Minister also refers to consultations which have taken place with the trade union movement, but in the same breath he makes it clear in his second reading speech that the changes contained in the Bill reflect the decisions taken by the Government. Token consultation was all that was involved.

It is naive for the Minister to claim that because 90 per cent of notified price increases have been approved there is a 'high level of price responsibility' among Australian business. The impact of the PJT extends far beyond the 10 per cent of price increases which are disallowed. Business generally has been restrained from raising prices unnecessarily through the mere existence of the PJT. The fact that companies have had to go before it and justify their proposals has forced them to look more critically at their operations and their responsibilities to the public. The annual report ofthe PJT for 1975-76 underlines this point. At page 1 1 the report states:

Since the beginning of its operations on 1 August 1973 the Tribunal has processed 19 100 notices of higher prices; 3859 in 1973-74, 7502 in 1974-75 and 7739 during 1975-76.

Over the same period, the Tribunal has held 53 public inquiries; 15 in 1973-74, 33 in 1974-75 and 5 during 1975-76. 2757 notices of proposed higher prices received over the period were either withdrawn by companies or were varied to provide for lower prices than those originally proposed, following inquiries by the Tribunal and discussions with the companies concerned. The numbers of notices withdrawn or amended was 457 in 1973-74, 1 181 in 1974-75 and 1 1 19 in 1975-76.

Quite clearly, many millions of dollars of 'excessive' price rises have been involved in these applications. Recognition of this factor has forced companies to modify their price demands. The Government is proposing that these requirements be eased. Its attitude on modification of price demands is markedly different from its attitude on modification of wage demands. The Government proposes that the PJT exempt from price justification those industries in which there is 'significant and effective competition'. This proposal begs the question of how the degree of competition is to be assessed. Would it be on an industry-by-industry basis after suitable public inquiries? This implies a very long selection process. It also implies consequent injustice to those arbitrarily placed at the end of the queue. Would the Trade Practices Commission be required to provide its assessment of the degree of competition in each industry by way of an analysis of cleared or authorised restrictive practices, and the apparent level of unauthorised and illegal practices, in that industry? Or would a very large cross section of industry be arbitrarily selected on the basis of concepts such as the number of competing firms in the industry, the level of imports or the recent history of price increases of the overall level of profits to be used as criteria.

Concepts of competition are difficult to define. It is well recognised that under normal business conditions a fairly hig' degree of price leadership prevails in Australia and it is very unusual for a firm with substantial capital assets to cut prices so as to increase significantly its share of the market, thereby obtaining increased production and economies of scale with a rationalised range of products. Competition tends to be soft competition and price cuts are usually muted by descriptions such as 'specials' for a limited period with a subsequent return to the recommended retail price.

Like the Budget strategy, the real aims of this legislation remain unstated. Any examination of the Government's words and actions in recent months leads to the inevitable and now widespread conclusion that the Government's desire to increase the profits of its business supporters is to be achieved at the expense of wage and salary earners. Certainly, the Treasurer (Mr Lynch) has made no attempt to hide the fact that he expects wage earners to carry the major burden for the fight against inflation through deliberately increased unemployment and cuts in real wages, on the one hand, and devaluation, on the other hand. The winding back of consumer incomes is certainly not likely to generate a consumer led recovery. Consumers cannot spend more when their wages have been slashed through the imposition of the Medibank levy and higher taxes or when their jobs are threatened by company crashes and closedowns and when prices are increased by the effects of devaluation. No matter how high profits are allowed to go, business will not invest unless consumers have the ability and the desire to buy the new products produced.

Capital investment is now declining rapidly and, in real terms, is already less than the quarterly levels existing at the end of 1972. The windfall double depreciation and investment allowance package in the first half of this year did not achieve the take-off of investment demand, the increased employment and the boost to consumer spending predicted of it by the Government. Part of the reason for the failure of that package was, of course, the fact that this Government had deliberately set out to reduce spending power for wage and salary earners. The Government has stated that the key to its desired economic recovery is a return to pre- 1 972 levels of the relative share of gross non-farm domestic product going to capital and labour. There is no particular reason advanced for this thesis. The Government may say that the tribunal will have greater capacity to use its resources to investigate those areas where there is evidence of price abuse, but the facts belie the statement. At page 7 of its report, the Tribunal alludes to this contradiction when it says:

The refilling of any staff vacancies has also been particularly difficult due to the uncertainty about the tribunal's future operations.

Later the report states:

Such a climate was hardly conducive to the efficient operation of the Tribunal and was particularly unsettling from the point of view of policy development.

It is clear that the Tribunal is destined to be reduced to a pale shadow of its former self and will simply monitor price increases, rather than force companies to justify them. The Minister for Business and Consumer Affairs (Mr Howard) says as much in his statement. In congratulatory terms he records that the 'cumulative purpose of the changes is to bring about a very significant reduction in the number of companies which must notify the Tribunal of their price increases' with a view to the Tribunal's principal function being that of 'price surveillance rather than price approval'.

Already companies are refusing to co-operate with the Tribunal by refusing or delaying the supply of requested statistical information. The effects of the Government's proposed changes will be to enable price increases for goods and services to flow back and forth between industries until they appear in the consumer price index. At that time, as we all know, the Government will attempt to stop the key supplier of servicesthe labour force- obtaining its price increase. Thus, the Government's policy is clearly one in which productivity gains are to be considered from now on as the exclusive reward of the business sector. There are many other areas which the Opposition will discuss during the Committee stage. My colleagues who speak after me will expose what the Government is doing at this end of the spectrum on the question of price increases by manufacturers and businesses in Australia.







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