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Tuesday, 22 February 1977


Mr HAYDEN (Oxley) -The rhetoric of the Treasurer (Mr Lynch) is as relevant and as helpful as the shuffle of deck chairs on the Titanic as it went down. His reassurances are as fortifying as the presence of a mortician beside a sick patent's bed. Before he arrived here, there was a commonplace saying: There are statistics, statistics and then there are damned lies. Since his arrival as Treasurer we now say: There are statistics, statistics and then there is Phil Lynch. He quoted some statistics today in a rather cultivated way to try to bolster his case. He said that when we were in office statistics of the Organisation for Economic Co-operation and Development on inflation for member countries showed a serious situation. He could have added that those statistics showed a serious situation in inflation, unemployment and general economic conditions for all industrialised countries, not just this one. But now the situation has changed somewhat. Many of the countries are winning in the battle against inflation. Our major trading partners are. But we are missing out.

The Treasurer did not point out that the latest OECD statistics on consumer prices show for the 12 months to November 1976 that Australia is sixteenth out of the 24 countries recorded. That means that relatively we are doing poorly in the fight against inflation. He said that when we went out of office OECD statistics showed a 14 per cent annual rate of inflation. He could have added that those same statistics for the 12 months to November 1976 show a 13.9 per cent rate of inflation, an improvement of 0. 1 per cent, garnered at the cost of excessively high unemployment rates, which are worsening, together with a bog-down in industry generally and grim economic conditions. He also observed that I said, when Treasurer in 1975, that if certain proposals were followed in ensuing months in 1 975 inflation would go down. The implications for the proposition then stated- and they still stand -were that the economy would improve. The present problems would have been avoided if the Government had pursued the strategy laid down in the 1 975 Budget. The important point is that some 18 months later the rate of inflation is higher.

Somewhere along the line, very early in the piece, the Treasurer lost me, as he lost most people who were listening to him, I am sure, with the multitude of figures which he quoted- the careful adjustment of statistics to bolster a flagging case. Let us state some honest, blunt, statistical facts supplied by the Commonwealth Statistician. When we went out of office, the rate of inflation for the December quarter of 1 975 , on an annual basis, was 14 per cent. On an annual basis, for the December quarter of 1976, it was 14.4 per cent. One might quibble that 0.4 per cent is not much of a movement, but the fact is that in 12 months of government, contrary to the promises which were made to the Australian public, there has not been any perceptible improvement in the rate of inflation; on the contrary there has been decernable worsening. The Treasurer can conjure as much as he likes with the inflation figures, but the fact is that the consumer price index figures are used in this country as the relevant measure of inflation, not the careful and self-interested calculations he has been using in such a bewildering way in this House today, last week and last year. The figures supplied by the Statistician for the consumer price index are the basis upon which wage claims, for instance, will be made in the national wage case. That is why they are particularly significant. The evidence is that when we went out of office the rate of inflation was coming down. With determined incompetence, the Treasurer and his colleagues have managed to reverse that trend and to lift the rate of inflation.

There has been some special pleading by the Treasurer, some misrepresentation, about the costs of Medibank and how they should or should not be treated in the consumer price index figures. Let me put some analagous propositions to honourable members and to anyone else who is listening, to explode completely the fictitiousness of that case. Does anyone suggest for a minute that because imported clothing will be more expensive as a result of devaluation, which it will- that is an effect of devaluation- and because devaluation flows from a government decision, those cost increases should not go into the consumer price index? Does anyone suggest seriously, for a second, that if there is a reduction in public transport charges as a result of a decision by State governments, that reduction should not be reflected in a downward adjustment in the compilation of the consumer price index figures? Of course not. If it were to be so, this Government could not take any credit for such an action, and to do so would be a completely misleading use of the consumer price index as a measure in the economy of price movements. That is the important point. It would be distorting to use that index. The fact is that the Treasurer has been quite dishonest in his presentation of the case to this Parliament.

In economics there are various laws. There is Saye's law; there is Gresham's law. Now we have Lynch 's law. Let me tell the House what Lynch 's law means in simple terms. It means that the annual rate of inflation now is 24 per cent. Let no one from the Government side quibble with that. I do not think much of the argument, but it has the substantial support of no one other than the Treasurer. Lynch 's law was established in the Opposition days of the coalition partners. In each quarter for 3 years the present Treasurer would, after multiplying by four the quarterly figure for the consumer price index movement, say that that was the annual rate. According to the Treasurer's own system of calculationLynch 's law- the rate of inflation is 24 per cent.


Mr Hurford - That is four times six.


Mr HAYDEN -That is four times six, as the honourable member for Adelaide points outthe simple proposition put by the Treasurer in the past and I am sure he still clings to it as tenaciously now as he did thoughtlessly then. The fact is that the anti-inflation policies of the Government are in tatters. The Government has been completely and consistently unsuccessful on every occasion that it has sought to project the likely inflation rates in the economy for this financial year. What is that evidence of? It is evidence of the simple fact that the Government cannot calculate the likely effects which could flow from economic decisions of the Government. The Government is responsible for the presentation of these things, not the Public Service. The Government has the final right to decide their appearance publicly and, accordingly, accepts the responsibility.

Let me take honourable members over some of the history of these projections. At Budget time we were assured that the rate of inflation by the end of this financial year would be down to a single digit figure. No one believes that now. That is, it was to be less than 10 per cent. At the national wage hearing in November by the Australian Conciliation and Arbitration Commission the Government produced projections of the calculated effects on wages and inflation of alternative award wage adjustments, and produced projections which clearly showed, firstly, the impossibility of the Government achieving a single digit rate of inflation level for this financial year, but more importantly, that the Government, in its moments of candour and honesty, which are mostly private moments, we all know, expected an inflation rate of something well over 12 per cent and probably over 13 per cent. That was in the submission to the Arbitration Commission in November. We now have more recently, as a result of devaluation, the Bureau of Agricultural Economics rather cautiously predicting the rate of inflation for the financial year at something like 15 per cent. The latest statistic on inflation movements, the December quarter CPI of 6 per cent, shows very simply that all those calculations fall by the wayside with the dramatic increase in the level of inflation. A substantially higher increase must be recalculated upwards again because the submission to the national wage and wage indexation hearing in November 1976 was based upon a projection of a 4.6 per cent inflation increase per the CPI for the December quarter. It is now 6 per cent. I predict confidently but quite unhappily, because so many good people in this community will suffer- so many good people are friends of mine, if I want to personalise it, and that is not unimportant in influencing people's attitude- inflation will be of the order of 17 per cent to 18 per cent by the end of this financial year. It is nonsense to talk about the once-only effect of Medibank charges. There will be second and third round effects. There will be the effects of the devaluation which have yet to feed into the economy.

The Government has been disastrous in its economic policies and in the handling of the country's affairs.







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