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Mr Bernie Fraser's clear warning

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Leader of the Opposition


Mr Bernie Fraser's Clear Warning

Yesterday's speech by Mr Bernie Fraser, the Secretary of the Treasury, is a clear attempt by the Treasury to distance itself from the Hawke Government's faltering economic strategy.

The speech contains not only clear warnings about the harmful consequences of current policy but in a number of areas flatly contradicts claims and statements by the Treasurer and the Prime Minister.

Cutting through the careful wording, it is clear that Mr Fraser is saying the following:

- if the present level of interest rates continues business investment will be choked off and the . current recovery stalled

- the beneficial effects of the devaluation earlier this year will be less, and slower in coming, than previously claimed by the Government

- unless there is a sustained recovery in the value of the dollar, the Accord will need to be renegotiated

- the price effects of the initial devaluation are not yet out of the system; in fact Mr Fraser by implication says these price effects could be as high as 3 per cent rather than the 2 per cent claimed by the Treasurer

- the productivity/superannuation trade-off will lift employer costs - which directly contradicts the Treasurer's claim that this arrangement represents effective discounting for the price effects of the devaluation.

One of the more dramatic areas of conflict between Mr Fraser and Mr Keating relates to the impact of our inflation rate on Australia's international competitiveness.

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Parliament House, Canberra, A.C.T. 2600 Phone 72 6994


Only yesterday Mr Keating said that inflation, as measured by the C P I , was "singularly inappropriate" as an indicator of international competitiveness. But later the same day, Mr Fraser warned that Australia's inflation rate must be brought into line "with that of our competitors in the

shortest practical time".

The Prime Minister and the Treasurer never tire of repeating that everything in the economic garden is green. -The Hawke Government has used up virtually all its options in coming to its deal with the ACTU.

It now appears to have reverted to the Micawber Option - i.e., waiting for something to turn up.

Mr Fraser's, speech is a timely reminder of Australia's underlying economic problems.

Canberra 21 November 1985