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Wednesday, 9 October 1991
Page: 1517

Mr HOWARD(11.40 a.m.) —-In the time available I would like to address some remarks to the biggest social and, I suggest, political problem which presents itself to Australia at the present time, and that is the very high level of unemployment. Probably one of the most authoritative research bodies on labour markets and employment trends in Australia is the Flinders Institute of Labour Studies in South Australia. Regularly it produces a document titled Australian Bulletin of Labour, and it is authored by Professor Richard Blandy, who I know some members on the Government side would see as belonging to the deregulatory kidney of the industrial relations debate, but who nonetheless has enormous intellectual respectability and experience in this area. He had this to say about the current employment situation:

. . . on the basis of these leading indicators--

and he had reviewed the material--

taken together, it is a fair supposition that unemployment is likely to reach its peak early in 1992, at something in excess of 900,000 persons. For this to happen, economic activity will stop falling and start increasing during the present half of 1991. Since we believe that the economic recovery will be subdued, we do not expect unemployment to fall rapidly from its peak over the course of 1992. As noted earlier, it will take many years, judging by the experience of the 1980s, to reduce unemployment to less than 8 per cent of the labour force.

The excerpt concludes by saying:

Mr Kerin has been honest and correct in stating this.

Let me say that I would regard that particular summary as being a fair assessment of what is likely to happen. I would express the hope that unemployment does not go over 900,000. I would hope that tomorrow's figures disclose no increase, and hopefully some decrease, because I have been at great pains in this shadow portfolio to make the point again and again that the Opposition draws no comfort at all--in fact, the reverse--from any additions to the ranks of unemployed in Australia.

But the Australian Bulletin of Labour has drawn attention to an unpalatable fact about the Australian labour market: that whenever we have periods of high unemployment it always takes years to get back to the level of unemployment that existed before it began to rise, and each successive recession leaves the situation progressively worse. In the 1970s we first experienced in the postwar life of Australia high unemployment. We did not have it in the 1950s and the 1960s, those `dreadful, stagnant days' when, as we are constantly told by some honourable members opposite, we groaned and grunted under the weight of the `inefficient, hopeless, job-destroying Menzies-McEwen governments' that, of course, gave us a period of unparalleled high employment. But in the 1970s that changed. Not all of it changed because of the policies of the Whitlam Government; a lot was because of the social changes, the oil shock, the disappearance of so many unskilled jobs and all the other attendant things. But in 1970 we first had high unemployment, and after it began to recede in the late 1970s it never went back to the pre-1974 level. That pattern repeated itself in the 1982 recession even worse. Unemployment went higher and it took years for it to return to anything approaching the 1981 level. It never did return to that.

The sad fact is that we face the same likelihood on this occasion, no matter who is in power after 1992. Even if there is some kind of tepid economic recovery in the first half of 1992, we will see a very slow return to lower levels of unemployment.

Against that background, we have to ask the inevitable question: what can be done? We are not in this place to engage in a council of despair and defeatism about the unemployment situation. I suppose the first thing that can be done is that we ought to tell the truth about unemployment; we ought not exaggerate it; and we ought not be doom and gloom merchants. But, by the same token, we should not indulge in some of the Pollyanna language which has lately come, particularly from the Prime Minister (Mr Hawke). On the truth stakes, when it comes to projections from the other side of the House about what is going to happen with unemployment, I would support the Treasurer (Mr Kerin) and I would reject Mr Hawke. The current Treasurer has been admirably candid about the very restrained prospects of reducing the level of unemployment. In contrast, his Prime Minister, as he was several years ago on interest rates, has been somewhat cavalier.

The second thing that can be done is to get the economic debate back to what is relevant to reducing unemployment over the longer term. In that context, the current preoccupation of many people opposite and the media with interest rates as an issue directly relevant to the current level of unemployment is absolutely ridiculous. If interest rates fell by 3 per cent tomorrow, it would make not one jot of difference to the level of unemployment over the next six or nine months.

Anybody who has any elementary understanding of the Australian economy will understand the enormous leads and lags that are involved so far as levels of monetary policy are concerned. The unemployment we are now suffering is the product of the high interest rates of late 1889--I mean, 1989. I might say that that slip almost has some relevance. There is a lead time of something like 15 to 18 months. In that context, I remark that the contribution of the former Treasurer, the honourable member for Blaxland (Mr Keating), to this debate is nothing other than cheap political grandstanding. He says he is interested in jobs, jobs, jobs; on the subject of interest rates, I think he is interested in the votes, votes, votes within his Caucus.

To suggest that unemployment over the next few months is somehow or other going to be affected by whether the Reserve Bank drops the interest rates by half a per cent or one or 2 per cent or whether it leaves them where they are over the next couple of months is absolute economic nonsense. Mr Keating, better than anybody else on his side, ought to know that. He really ought not be linking current levels of employment with current levels of interest rates. It is an absolute absurdity in economic terms and he knows it. It demonstrates that it is nothing other than a political ploy for his own internal Party purposes. We must constantly remind the Australian public that the only sure prospect of delivering some sustainable gains on the employment front over the next few years is to accelerate the process of micro-economic reform. Accelerated progress in that area will deliver more dividends on the employment front than any short term manipulation or finetuning of interest rate levels or minuscule adjustments in fiscal policy.

The broad agenda of micro-economic reform; the change to a workplace bargaining system in industrial relations, which is the most important micro-economic reform of all; accelerated reforms of the waterfront and of the transport system; sensible investment by both the public sector and the private sector in infrastructure; and, of course, fundamental reform to Australia's taxation system--all of those things over the medium to longer term will deliver gains on the employment front because they will improve the general economic environment. It remains true today, as it was in the 1970s, that the only way that jobs are generated is by generating lasting and sustainable economic activity. Those in the Victorian Socialist Left or anywhere else who believe that in 1991 throwing a few hundred million dollars extra by way of economically dubious public works will achieve a lasting employment dividend are deluding themselves. I would say to the Government that, to the extent that it accelerates the process of micro-economic reform as being the true basis of reducing unemployment, it will have our lasting and sustainable support. (Time expired)