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Warnings on the inflation front

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The Opposition Leader, Mr Andrew Peacock, said today the March quarter Consumer Price Index result was a warning to the Government of the future inflationary effects of its present economic policies.

"The result for the year to the March quarter (5.5 per cent on an ABS basis and 5.3 per cent on an adjusted basis) is the first rise in the annual inflation rate for two years," he said.

. "It is a warning to the Government that the inflation rate is now on the rise again, particularly with the flow-through to prices from the dollar devaluation yet to hit consumer prices.

"The annual rate of inflation through to the end of March quarter at 5.3 per cent is up slightly from the 5.1 per cent rate recorded in the 12 months to the end of the December quarter," he said. .

"But there would have been little, if any, flow through of the dollar devaluation to consumer prices in the March quarter - that flow through will hit consumers in the present June quarter. . .

"With petrol prices due to go up by around 4c a litre on May 1 and car price rises to hit on the same day, there will be an inevitable hike in the inflation rate in this quarter and in the following September quarter."

Mr Peacock said that with the flow through to prices of the dollar depreciation still to come, the Government could not afford to relax its efforts to reduce the inflation rate.

He said there was now a danger that with the operation of the full wage indexation system that a new round of inflationary increases could start with wage increases also feeding through into prices. -

"Business is about to be hit with the 2.6 per cent increase in wages from the National Wage Case and on top of that the National Accounts for the December quarter showed a worrying increase in the 'wages d r i f t 1, he said.

"To restore some confidence that the wage impact on prices and the overall inflation rate will not increase, the Government immediately move for a discounting of the potential wage-impact of the dollar depreciation."

Mr Peacock said that unless the Government took such action, there would be little chance of maintaining the confidence of an already sceptical business community in the ability of the Government to handle the economy.

"And that could have dire consequences for investment and employment in the business community, as well as damaging consumer and community confidence," he said.

. 24 APRIL 1985

Inquiries: 0 6 2 - 7 2 6 9 9 4






Mr Peacock do you think the Government is robbing Peter to pay Paul?

Well, it is unclear as to what the Prime Minister is doing other than engaging in a public relations exercise. The Australian public ... they know when someone is proffering an argument and putting it to

them, but if they are to be convincing they have got to provide evidence. And throughout the'afternoon Mr Hawke in Question Time was given ample opportunity to give evidence of his billion dollar cut, to accompany

his call that people must tighten their belts. I happen to believe that the Government has got to tighten its belt, but I am by no means convinced that this Government is in fact reached the effective decisions that Mr Hawke is saying they have. This is

the highest spending, biggest taxing Government in Australia's peace-time history and it is more .

profligate than any Australian individual is at the moment. The duty is on Mr Hawke to come out with the evidence to support his remarks otherwise it will be seen as a shallow public relations exercise. He was

totally unable to answer any questions today which calls into question not only his own credibility but that of his Government.

Mr Peacock isn't it unreasonable to expect .the Prime Minister to foreshadow budgetary measures ...

It would be most unusual except he has gone forward to the Australian public all yesterday and indicated that this would be done. He indicated the amount. He is unable to substantiate it now or to indicate on what it is based, whether it is the forward estimates

of January or whether it is, in fact, making

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sallowance for the fluctuations in the currency at the present moment. What it does,.in fact, is call into question the Government's fiscal, monetary and wages policies because they are not being addressed and to say that the Trilogy will be achieved additionally without giving any evidence, at this stage, renders the arguments valueless. And I think if I may add, as well, there are a lot of people in this community who are being told to tighten their belts. There are a lot of them who are finding it very hard to make ends meet. They know they need genuine tax reform. They are not profligate, it is this Government that is the biggest spending Government in Australia's history and I don't blame them if they are annoyed when they are told they have to tighten their belt and there is no substance to the Government call for belt-tightening.Q. The Business Council said today that it agreed withwhat the Government is doing and in fact felt it was moving on the right track.A. Yes, well I have indicated to you that we are all infavour of cutting back' expenditure but I will believe this Prime Minister when he shows the colour of his money. When he indicates to us all just where all the cuts are going to come. It is no good simply saying we are going to do it if you don't accompany it with the evidence, and if you do a nation-wide press conference and say this is the direction I am going, but I am not going to tell you how I am going to get there, why should we believe him?Q. Mr Peacock does it worry you that some of yourcriticism could be seen or could be construed as talking down the dollar?A. Well, if anyone construed it in that way, they wouldbs wrong. It is my view that in fact we want to see a strong dollar. We in the Opposition are all in favour of the floating of the dollar, we have been all along. What I find interesting is Mr Hawke having said let the market make an assessment of the dollar, let it place its value on the dollar, now blames the market as being irrational on occasions.' If you give the market the opportunity to value thedollar you have got to accept their valuation. The reason for the fluctuations in the dollar are primarily the lack of confidence in any blue-print or schedule for the future with this Government. I mentioned big spending and high taxing and I have indicated to you that the fundamentals are wrong, whether it be fiscal policy, monetary policy or wages policy. There are some distinct advantages wrought from this change in the value of the dollar. It makes export industries more competitive and it assists our import competing manufacturing industry. But unless you have got a sensible wages policy down the line whereby you will in fact have discounting for devaluation, where in fact you will not allow the... / 3


productivity increases demanded by trade union officials, where you will stop the trade union movement from engaging in further demands for superannuation and engaging in demands for a shorter working week, you will throw away all the advantages

gained by the current fluctuations.

You mentioned taxation Mr Peacock, why isn't the Opposition attending the Summit.

Well we indicated very clearly last year even before the election was held what our blue-print for tax reform would be - income splitting, child care rebates, cuts in Government expenditure, real .

reductions in income tax, broadening the tax base, no capital gains tax, no death duties, no gift duties and we were able to spell out which way we would go. The Prime Minister went into the election without any

tax policy, it was suggested to him by a Perth radio station that he in fact had the Tax Summit and he thought that was a good idea at the time. If I

though that he had a clear idea of what he wanted to achieve from the Tax Summit I would give it consideration. But, in fact, he has not spelt out a policy and it is his duty to be governing with a

clear indication to the people as to what he is on about and not simply having a talk-fest which to date would indicate to me is simply aimed at raising more revenue rather than giving real and genuine tax


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