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Tuesday, 22 February 1977


Mr DEPUTY SPEAKER (Mr Lucock (LYNE, NEW SOUTH WALES) -Is leave granted? There being no objection, leave is granted.

The document read as follows-

 


Mr LYNCH -I turn now to the figures for the December quarter consumer price index released this morning by the Acting Commonwealth Statistician. As I said in my Press statement issued at midday today, the December quarter CPI reflects the considerable progress made by this Government in winding down the rate of inflation during 1976. When the once and for all effects of the changed arrangements for health insurance are taken out of the index the figure for the quarter amounts to 2.8 per cent. The equivalent figure for the 1975 December quarter was 6.3 per cent. On any test, the underlying rate of inflation was lower at the end of 1976 than it was when we came to office. Excluding the effects of changes made to Medibank by both the present Government and the past Government, the increase in the CPI in the year to the most recent December quarter was 10.8 per cent, as against 16.7 per cent in the year to the December quarter 1975. The figure of 16.7 per cent includes, of course, the first round price impact in the December quarter 1975 of the Hayden increases in indirect taxes and charges. Even if allowance is made for these increases in taxes and charges, the underlying increase in the index in the year to the December quarter 1975 was 15.1 per cent. The corresponding increase in the year to the December quarter 1976 was not 15.1 per cent; it was, in fact, 1 1 per cent.

To take another basis of comparison, in a comparison of the increase in the index over 6-month periods, expressed as an annual rate, the same improvement is evident. The consumer price index, after adjustment for government taxes and charges and for the effects of Medibank, rose at an annual rate of 10.2 per cent over the last half of 1976, compared with a rise of 14.3 per cent over the last half of the previous year. In other words, in the second half of 1976 inflation was running at an annual rate some 4 percentage points or more lower than in the second half of 1975. I seek leave to incorporate in Hansard a table setting down movements in the consumer price index on the basis to which I have just referred.


Mr DEPUTY SPEAKER (Mr Lucock -Is leave granted? There being no objection, leave is granted.

The document read as follows-

 


Mr LYNCH - If the food component of the index is excluded, the figures indicate that in the second half of 1976 inflation was running at an annual rate almost 6 percentage points lower than it was in the second half of 1975. In short, on any accepted basis for comparison- whether one takes the December quarter alone, the 12 months to the December quarter, or the 6 months to the December quarter expressed as an annual rate- the underlying rate of inflation is significantly less now than it was 12 months ago. These are the facts; they cannot be challenged by the Opposition Party. Because the Opposition has seen fit to dispute the analysis I have given I mention what the honourable member for Oxley (Mr Hayden), the former Treasurer, had to say on the subject last year. As the then Treasurer he drew attention to the 'largely once only effects' contained in the December quarter 1975 index in the following terms:

A large proportion of the CPI increase has been due to effects of increased charges by State and Australian governments' instrumentalities and increases in duties and charges by those governments.

The honourable gentleman went on to say:

These will be largely once only effects and, provided sensible restraint is used in economic management in the course of the calendar year, there is no reason why the CPI should not come down substantially for succeeding quarters.

This is not the present administration speaking; these are the words used by the honourable member for Oxley who is obviously very embarrassed to be reminded of what he said at the time. With that comment in mind the honourable member for Oxley is in no position now to cavil at the once only effects of the present Government's Medibank changes. The honourable member for Oxley also argued, in relation to the December quarter 1975 index, that not too much emphasis could be put on a single quarter and that it had to be averaged with the preceding quarter for purposes of economic analysis. I do not want to embarrass the honourable gentleman unduly. But in a low profile way I quote what the honourable gentleman said then about the position of averaging. He said:

You ought to put that CPI figure together with the September quarter CPI figure and average them ... I think you have got to put those two things together and to take the average for purposes of judging the economic effects.

This is the then Treasurer telling the Australian nation at large the sort of basis that he believed was reasonable for purposes of economic analysis. If one accepted the Hayden formula- which this Government does not- and excluded once again the effects of changes made to Medibank by the present and the past Governments, the average quarterly increase in the consumer price index during the last 6 months of 1975 was 4.6 per cent. For the equivalent period of 1976 the figure was 2.5 per cent or almost half the rate of increase during the same period in 1975. The honourable gentleman- I say this to him in a very pleasant way- is hoist on his own petard. Remembering those comments made by the honourable gentleman will not provide the type of support which obviously he requires in the Australian Labor Party in relation to his challenge for the Deputy's position which will come up in the months ahead.

I have referred today to 4 different methods of comparison, including the one used by my predecessor, the honourable member for Oxley. On every valid statistical basis it can be seen that the underlying rate of inflation is lower now than it was a year ago. It does the Opposition no credit whatever to seek to distort the picture with a series of half truths and inaccuracies. I recall that when the present Leader of the Opposition (Mr E. G. Whitlam)- I would like to give him a serve, if I may, but only in passing- commented on the 5.6 per cent increase in the index for the December quarter of 1975 he' said that the December 1975 quarter index 'reflected moves toward economic recovery sparked by the August 1975 Hayden Budget'. The Leader of the Opposition might well ask himself why the Opposition now claims that the latest CPI does not reflect recovery whereas the one a year ago did. I also draw attention- it is embarrassing to do this to the Opposition but one must put these matters on the record in a pleasant way- to what the

Leader of the Opposition had to say about health costs. He said:

The December quarter figures also show a very substantial decrease in the cost of health services as a direct result of the Medibank program introduced by my Government.

The honourable gentleman said that at the end of the December quarter in 1975. It is, of course, completely fatuous to assert that the cost of health services declined simply because the bill was transferred to the taxpayer. It is equally fatuous for the Opposition to be claiming in the House today that the latest index reflects an increase in the cost of health services.

Finally, in looking at what members of the Labor Party have had to say, I remind the House that the President of the Australian Council of Trade Unions had very little to say about the December 1975 index, apart from calling for its full flow-on through wages. No doubt that gentleman, who a year ago was an apologist for the Labor Party's economic errors, will now be at the forefront of assertive criticism. Not only has the Opposition wrongly assessed the rate of inflation- simply to extract the maximum possible political capital- but also has it failed to come forward, once again, with a rational economic program. The Labor Party has been in Opposition now for more than 12 months. That time has been wasted. It has not learned from the mistakes that it made when in government.

The Opposition's so-called alternative amounts to a scrappy 2 page Press release. It has been condemned by the honourable member for Adelaide who, together with the honourable member for Oxley, apparently speaks for the Opposition in this House on economic matters. I quote what the honourable member for Adelaide had to say about the Labor Party's alternative program -


Mr Hurford -Come off it.


Mr LYNCH - The honourable member is embarrassed, but he put these words on the record:

The danger in Labor's approach is the possibility of intensified pressure of demand leading to further prolonging of inflation.

The Opposition's policy completely omits a reference to wages. It completely turns its back on two of the four arms of economic policy. In relation to monetary policy it believes that monetary growth should now underwrite the rate of inflation rather than restrain it. As I have said on previous occasions this amounts to nothing more than a lurch back into the policy errors of the past. To give the lie briefly and decisively to the program which the Australian Labor Party would foist on the Australian community I quote again the words of the British Prime Minister, Mr Callaghan:

We used to think that you could just spend your way out of a recession and increase employment by cutting taxes and boosting Government spending. I tell you in all candour that that option no longer exists and that insofar as it ever did exist, it worked by injecting inflation into the economy.

But that statement encapsuled the very precise description of that which the Labor Party puts forward. The Government decisively rejects the matter of public importance proposed for discussion by the House.

Mr DEPUTY SPEAKER (MrLucock)Order! The Treasurer's time has expired.







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