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Wednesday, 8 December 1976

Mr LYNCH - That was rather a hodge-podge series of questions. What I said in the House was that devaluation added to the increase in the price mechanism. That is on the record. No Minister of this Government has denied that devaluation does have an inflationary consequence. But what we have gone on to say is that, unlike the action of the Labor Government in its devaluation in September 1974, this Government, concerned about the inflationary consequence of the devaluation, moved to take offsetting action in relation to the fiscal side, the monetary side and in relation to wages policy. Those matters were referred to in the original statement, which has been followed by statements by other Ministers relating to matters which fall within their own jurisdiction.

As to the under-capacity and under-utilisation of resources in particular industries and companies, I said to the honourable member for Perth at the time that, in looking at the inflationary consequence of devaluation, one should not ignore the fact that a large number of manufacturers are working under capacity at the present time and that they would have an ability to raise output and to lower unit costs and therefore to hold prices in their particular industries in the devaluation context. The Government has been advised of some significant areas where prices will be held, but that is a matter of confidence between the Government and the companies concerned.

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