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Wednesday, 8 December 1976
Page: 3515

Mr KELLY (Wakefield) -Mr Deputy Speaker,as you know, it is not unusual for me to be heard talking in this House about tariffs. Originally when I started out in this House on this rather lonely campaign to get a more sensible and responsible attitude towards tariffs, I tackled it from the point of view of the damage that unwise tariff protection was doing to my rural constituents. As my thinking developed and as I was led along the road by other people, I realised that even more important than that was the question of resource allocation so that we could use our limited resources in the best possible way, so that the standard of living of the people generally could be raised. I will not talk about either of those 2 matters today, because today I am interested only in the impact on inflation of the Government's decision to devalue. The cost of living is the long winded way of saying it. I do not pretend to be one of these high fliers or high steppers. I am a modest man by nature, with a limited kind of intellect. I do not pretend to be able to take apart an economic problem in the same way as some people can.

I believe- I have been told- that inflation is the number one problem which the country faces. It was not hard to understand this. It is the kind of thing that a man of my intellect can grasp. We had the example set by the Australian Labor Party when Dr Jim Cairns was grinding out the money down in the bowels of the Parliament, and the rate of inflation was rising and the level of unemployment was rising also. It was clear- anybody could see- that a country which has a high rate of inflation will not attract investment. A country which has an inflation rate akin to that of a banana republic will not attract investment. Everybody said to me that we had to get the rate of inflation down. I could see those kinds of problems clearly. There was something that was kind of pathetic, I suppose, in that attitude.

I have been a member for a long time. I have seen these brilliant young people going past me in a steady stream. I often wondered why. Then I realised what I must learn to do. I had to polish up my footwork and forget the things which I had been told were important if I were to get on in this political field. Until now, because I do not have this wide ranging and eloquent way of looking at life, I stuck with the problem that is clearly before us. Inflation is the number one problem. That is what they told us, and that is what I believe. I think if one looks at what is happening around the world it is not hard to realise it, to echo it and to mean it sincerely. We must do something worth while about inflation.

Then the decision to devalue was made. From where I sit, I am not in a position to criticise that decision. One needs to be in the Cabinet to know whether it ought to have been made and, if it were made, how large the percentage ought to have been. I waited around because I knew the Government was dedicated to the task of defeating inflation. I knew that shortly there would be some strong, competent, anti-inflationary action taken. I knew there were only a limited number of things which it could do. I knew that one of the limited options was to have an appreciation- to get rid of the problem by going back to where we were previously. This has started to happen. I think it is very sensible. I am not trying to be funny. Of course the exchange rate must rise. It is one of the things. Revaluation is one of the things that can save us from inflation-one of the limited options to get us away from this dreadful problem of inflation which everybody is saying is so serious.

Another option is to work out some way- this is where I am well outside my sphere of knowledge- in which, when the money comes flooding back in, it is grabbed and put in a particular yard. That is the kind of word which I would use. People with the competence of the Minister for Business and Consumer Affairs (Mr Howard) would have a finer, flowing phrase for it. Either that or interest rates will be put up so that the money is kept in the Government's hands and is saved from sloshing around on the cowshed floor and upsetting inflation again. I am sorry if my more rural illustrations offend the Minister, but that is the way I think. These are 2 options.

The third is to freeze wages and prices. I have heard of that suggestion previously. It is the kind of thing that everybody talks very wisely about. It was tried in the United Kingdom. We know it did not work, except for a short while. It would not be easy in Australia because we have constitutional problems of division of responsibility between the States and the Commonwealth.

However, that is one option. We must do something. My belief is that if the Government really means what it says it will do something about inflation. That is the third of the limited options.

The fourth option is to take some action on the tariff front. There are 4 options. There may be others. Maybe brighter people here will think up another one or two. They are the four which I have on my list. We know that if we do not use one we must use one of the other three. We must do so more courageously because they are limited options. If we are earnest, as I assume we are, in our determination to beat inflation, one of those 4 measures has to be used. I repeat them: Revalue and grab the money, raise interest rates, freeze wages and prices, or take tariff action.

Things can be done with tariffs that will affect inflation. We know that the price of imported goods is going to increase by about 20 per cent. About 60 per cent of these imported goods come in duty free and the prices of these goods will rise by about 20 per cent. Indirectly most of these goods go into manufacturing goods. So obviously the people who use those manufactured goods will have to put up their prices. We know also that a devaluation of IVA per cent increases the level of the barriers to imported goods by between 70 per cent and 75 per cent- one cannot be specific. In many cases the extra height of the tariff wall will stop the flow of goods coming into Australia; and the price of the Australian goods might not necessarily rise to the duty paid price, although in many cases it is likely to do so. So there will be an increase in the price of tariff protected goods.

Even more importantly, behind this greatly increased tariff wah is the opportunity for sweetheart agreements between people who now have a great deal more fat to use- who have a great deal more room to manoeuvre than they had before. Sweetheart agreements can then be made with the workforce. This was a chronic problem prior to the review of tariffs. That is why the metal trades were always likely to be leading in any wage demands. We know what happened with General Motors-Holden's Pty Ltd who demanded and indeed received from the Government an increased protection which enabled them to negotiate a sweetheart deal with their people. One can always pick a person who is dining out on an expense account by the enthusiasm with which he summons the waiter. The fact is that in this area people can make sweetheart deals because someone else pays for them. The impact of this is likely to be devastating on the wages front.

The Minister for Business and Consumer Affairs said in his second reading speech that the Government hopes to stop such agreements by telling companies that if they do that kind of thing they will not receive tariff protection. Being a youthful person, the Minister would not remember wartime when we used to have rationing and the like. We were trying to stop the supply and demand pressures from working naturally. In those days we had the flame of patriotism to reinforce the edicts of the law, but those measures did not work at all well.

Honourable members might remember the story of 2 doctors in a hotel lounge talking about their practices. One said to the other: 'I have 6 cases of meningitis in this district'. The chap sitting behind him patted him on the shoulder and whispered: 'Look, 111 take the lot'. With the best will m the world, nobody can pretend that any arm of government can control the pressures of supply and demand for long. Perhaps it can be done with the big companies, but we all know of ways to beat the system. I am looking at the honourable member for Port Adelaide (Mr Young) who is smiling knowingly. In his time he has used most of those ways to beat the system. Of course, he would not talk about them now, but from his past he would be well aware of what is done and will be done again to beat the government system. I knew that tariffs were important and that something could be done in that direction. Of course, I knew that the Government had the stern example of the United Kingdom before it, knowing that if something is not done following devaluation the country will go down the economic drain. Maybe it will go down with its eyes shut and its mouth open but, whatever happens, a government must be tough after devaluation. With the example of Britain clearly and sadly before it our Government must have been determined to do something. I sat back waiting. I thought: Now the Government means to do something about inflation. On 3 December I asked the Minister whether the Government was still keen to do something about inflation. With typical eloquence he spelt out the position yet again. So I waited confidently for the statement that I knew would shortly come.

I was not confident about across-the-board tariff cuts, because I must admit that I think that the Government has almost believed its own eloquence about the damage caused by a 25 per cent tariff cut. I find that I often have to defend the Whitlam Government's decision on this because the nervous Nellies of the Labor Party- I think honourables members have heard of them before- are not willing to take up the challenge. But I shall do so because the nonsense that we have talked on this side of the House about a 25

Eer cent tariff cut is now doing us a great deal of arm. I hope the Minister will listen to what I have to say. I hope that if he can challenge my figures he will do so. If he does not do so, I hope he will stop talking as he does about the damage done by the 25 per cent tariff cut. All of us who are in the game and who have studied the matter know that the 25 per cent tariff cut was the equivalent of about a 4 per cent alteration in the exchange rate. When the Labor Party was in government it altered the exchange rate by 20 per cent, which influenced industry about three times as much as did the 25 per cent tariff cut.

We know that the main reason why secondary industry is in trouble lies in wage increases. We could take the knitting industry as an example. The 25 per cent tariff cut damaged that industry to about the same extent as an increase of about 13 per cent to 16 per cent in wages, depending upon whether they were male or female wages. Actually, wage rises during that period amounted to 60 per cent. So to blame the problems of the industry onto the tariff cut is demonstrably wrong. I am sorry to have to come again to the aid of the nervous Nellies on the other side of the House, but I am sorry that we have made goats of ourselves by talking with great eloquence about the 25 per cent tariff cut when most of us knew we were wrong in doing so. So I did not really hope for across-the-board tariff cuts but I felt that something significant would happen.

Then last night the Minister made his statement. To say that it backs away from the problem would be putting it at its mildest. There are so many things in it that are nonsense. The Government is going to reduce the tariff barriers on black and white television. Honourable members can imagine what an impact that is going to have. I think it missed out on wagon wheels. If we go through the tariff quotas we find that Government is making great fellows of itself. But do honourable members realise that the tariff barriers on cars are now about 100 per cent? We would have to crawl up the tariff wall in a fourwheel drive car or push our way through with a bulldozer. That is the only way we will get cars into Australia over this tariff wall of immense magnitude. The Minister says: 'We will take off the quota restrictions. But if any more cars come in we will put the restrictions on again'. That is a very statesmanlike position to adopt!

I will not go right through the matter again. There is no doubt that the Government has not used the tariff as an effective weapon against inflation. The Government has not made any worthwhile difference to the situation. Anybody who has studied the question will know that there are no effective anti-inflationary pressures from this area contained in the speech of the Minister. So more has to be done in other fields, I assume. I go over these fields again: Interest rates, money control, wages and prices or revaluation. It may be that the honourable member for Port Adelaide (Mr Young) will give us one or two other options. But they are the other options I have, if the Government is going to do anything about inflation.

Mr Hodgman - Tax cuts.

Mr KELLY - Tax cuts have been mentioned by some of the more brighter ones in the community. I will stick with the matters I have spelt out. The options are closing in. If we are to do anything about inflation we have turned away from using the tariff as an effective antiinflationary measure. There have been only a few tinkerings with the tariff. If the Minister can prove how much will be done in the antiinflationary field by tariff adjustment I will be interested to hear from him afterwards. If he cannot do so, he ought to be able to do it. So more will have to be done in relation to other options. I repeat that my other options are interest rates, wages and prices squeeze or revaluation, or will we let the inflationary fires run? Are we going to back away from a problem about which we have been so eloquent? Are we going to say 'I know we meant to, but it was too hard'? In a year's time, we may look back on 7 December, with a great deal of sorrow and regret because we have let an opportunity pass us.

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