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Wednesday, 21 September 1983
Page: 1059


Mr ROCHER(11.43) —The magazine the Economist, in its Australian survey a few weeks ago, commented that the Prime Minister (Mr Hawke) sounded 'like meat and drink for the amateur psychiatrist'. Much the same is true of this Budget. I am not speaking loosely when I say that it is a schizophrenic Budget. In its worst aspects it is simply not attuned to reality. Its ends are not appropriate to Australia's economic situation. Its means are not appropriate to achieving those ends. Of course, none of this should be taken as casting aspersions on the Treasurer (Mr Keating) because, after all, much the same could be said of practically the whole of the Australian Labor Party's economic policy. The difference is that whilst even Labor governments seldom try to implement the crazier bits of their Party's policy, this unrealistic Budget will be a fact of day to day life in Australia when the necessary legislation is passed by the Parliament. It will come as no surprise to me if we have another mini-Budget before the end of summer. It will probably take that long for the deficiencies in this one to register in the collective minds of the Government and for members of the Government to get to work on a new one. It would be better, I suggest, for the country if they started now.

For some indication of the schizophrenic nature of the Budget all one has to do is compare Budget Statement No. 2 with the Budget Speech and recent utterances of the Treasurer and the Prime Minister. A clearer sign is the extent to which the whole-absolutely all-of the Commonwealth Government's Budget strategy is dependent on that splendid import from cloud cuckoo land, the infamous prices and incomes accord. I suggest that if honourable members ponder on the accord it appears to be a little like the Cheshire cat. It comes and goes. During the recess we saw and heard little of it, but in the lead-up to the national wage case and the Australian Council of Trade Unions Congress it has been much more in evidence. It certainly crops up every time the Prime Minister wants to do a con job on the public. The first time it worked. It helped him win the election. The Cheshire cat, or its grin, was apparent in this chamber during the National Economic Summit Conference. As a matter of interest, I invite everyone to remember what was in the communique issued by that conference, as well as its relevance to what has taken place since. To those who have examined the accord it has been obvious from the start that as a solemn and binding covenant it is about as reliable as Chamberlain's Munich Agreement with Hitler. There is no sign that either side in the accord intends to stick to it any longer than is to its perceived advantage. For that matter neither party could deliver its promises without a great deal of luck.

We are probably all in agreement that potential economic recovery will be destroyed by a wages explosion or that, alternatively, it will be severely damaged by excessive wage and salary increases. So what does the Government do about it? It produces the accord from the corner and gives the tarnished brightwork a quick rub. It flourishes the accord, haggles with the ACTU to find out the minimum pay increase it will accept, and keeps its fingers crossed that the economy can afford it. Meanwhile, it hopes the unions will not notice the pea in thimble trick it is playing with Medicare and the consumer price index. The Government hopes that the union movement will forget that the promised tax cuts were not granted. Some hopes! The process is obvious. It was very neatly exemplified in a speech by the Prime Minister recently in which he said:

Following the Summit and in our submission to the current wage case, my Government indicated support for a general wage increase in the order of 3 to 4 per cent in the second half of this year. Until the good news associated with the breaking of the drought raised food prices sharply, it seemed that an increase based on the increase in the CPI in the first half of this year might fall comfortably within this range. In the new circumstances, we judged that it was best to accept a wage increase of 4.3 per cent, to secure workers' firm commitment to pursuing wage claims only through the centralised system.

There are some points worth making about that passage. First, it is fair to assume that the Government would have liked to see an increase of only 3 per cent, but the truth is that it was willing to go higher in the hope of peace and quiet. Second, only some food prices, especially beef and lamb, went up because of the end of the drought. This drove up the food component of the CPI but, because the CPI shopping basket is unchanging while shoppers substitute relatively cheaper foods for temporarily more expensive ones, the effect of the food bill on the average family was exaggerated. Third, the increase in the consumer price index indirectly caused by the breaking of the drought does not in any way reflect an increased capacity to pay on the part of employers. Nevertheless, the Government goes ahead trying to buy industrial peace with someone else's money.

All the Government's rhetoric aside, does it really care whether another few thousand jobs are lost in sectors that cannot afford this extra payment? The answer to that has to be an unqualified no. Yet, at the same time, the Government was primping and preening itself on what it likes to call job creation programs. I have another example of the sort of thing I have been talking about. Summarising the economic situation to the Hobart Chamber of Commerce recently, the Prime Minister said:

Unemployment had spiralled to rates not experienced since the 1930s as business responded to high labour costs, a slump on profitability, and weakening demand.

What do we find in the Government policies mirrored in this Budget? We find further increases in labour costs and nothing to encourage profits-in fact there are some positive disincentives to profits in the private sector-also, thanks to the huge deficit, potential pressure on interest rates, inflation and the balance of payments because of the likely demand for increased imports. That is no way in which to encourage recovery.

The Government promised that it could and would simultaneously bring down inflation and unemployment. I am not so naive as to expect this to have been done within seven months, but if this Budget lasts out the whole year the job will not even have been started after 17 months. The Government is making no serious attempt to tackle inflation. Rather, by indexing wages and indirect taxes to the CPI it is locking the system into a neat circle. A rise in the CPI provokes increases in excise which cause a further rise in the CPI, and so on around the circle. Meanwhile a similar cycle is operating through CPI rises, increased wages, increased prices and another CPI rise. The two cycles will react on one another. It is a little like trying to put out a fire with petrol; theoretically possible, I am told, but not the way in which a sane man would go about it.

By indexing excise rates to the CPI the Government has increased its own interest in continuing inflation. From now on such taxes will stay steady in real terms as inflation continues, whether they are indexed excise or ad valorem taxes. Meanwhile fiscal drag will increase the real take from income tax. An honest Budget would have indexed income taxes as well as excise duties. As for unemployment, it seems that there is no chance of improvement as a result of this Budget. Even if all the job creation programs and everything else go according to plan the increase in employment will not be quite enough to absorb the increase in the work force. The Budget Papers acknowledge that fact. Only a tiny proportion of new jobs will be created in the private sector. The vast majority will be for new public servants-for example, the Medicare police-or for short term mickey mouse jobs on so-called community projects. I said at the beginning of my speech that the Budget measures pay little attention to reality. Professor Hewson, writing recently in the Business Review Weekly, seems to share that view. The Economist was no kinder when it stated:

The main aim of the new budget is to brace the rickety wages agreement with the trade unions.

The Economist went on to conclude:

This may prove to be wishful thinking.

What the Treasurer and the Prime Minister say suggests that they are on some levels aware of the realities of the economic problem, but what they propose does not fit reality. What they do corresponds with neither the economic problem nor reality. I believe it is not unfair to describe this Budget as schizophrenic .

It is time for the Prime Minister and his colleagues to come clean and admit that the prices and incomes accord is a con trick. As I have said before, it did what it was meant to do; it helped Labor win the election. But now the attitudes of both parties to the accord-that is, the Government and the unions-have shown it to be the cynical sham that it is. If any honourable members opposite think otherwise I suggest that they are even greener than the colour scheme of this chamber. It has happened before. It has happened in Britain and in the United States. Let me refer to an example in the United Kingdom. I shall quote briefly from a party political broadcast made in 1974 by Mr Michael Foot who, until recently, was the Leader of the British Labour Party. Speaking of the social contract that had been agreed between the United Kingdom Labour Government and the unions, Mr Foot said:

The trade unions agreed upon the way they would strive to help the nation. They knew that for quite a long time ahead, we just would not have the extra goods available to increase our living standards so they agreed to give centralised guidelines to wage negotiators which took account of that inescapable fact.

Mr Frank Chapple also had something to say about that matter. Mr Chapple is not an unimportant man in the British union movement. Speaking in 1979 and looking back on the social contract, he said:

I don't think the trade unions regarded the pay guidelines in the 1974 contract as being of great significance. Those that did, promptly lost sight of them in the rush to restore the pay situation after three years of Conservatory government . . .

All the signs are and have been since just a few days after the Summit Conference that the Australian union movement does not regard the various suggestions of pay restraint in the prices and incomes accord and the Summit communique as of great significance. For instance, on 19 April, almost before the ink on the communique was dry, Mr Ivan Hodgson, of the Transport Workers Union of Australia, and also of the ACTU executive, said on an Australian Broadcasting Corporation program that he did not recall agreeing to wage restraint at the Summit. He went on to say:

I'm not saying we offered or accepted anything. We had a very, very interesting discussion with everyone at the Summit, and I think it was worthwhile-at least as a public relations exercise.

Some honourable members will recall that in its second paragraph the Summit communique states:

There is a recognition that to achieve recovery will require restraint in expectations and claims from all sections of the community.

Obviously Mr Hodgson did not read the communique that far so he would not have seen paragraph 6 which refers to:

A community prepared to place a priority on employment and a restraint on self- interest.

Then there are the building unions whose attitudes to requests for restraint are similar to those of Nelson at Copenhagen. I refer to the blind eye and telescope incident. I am sure that Mr Ralph Taylor of the Australian Railways Union shares my reservations about the Government's wages policy. Recently on the ABC-I wholeheartedly agree with him-Mr Taylor said:

We hold no brief for the arm-twisting of people behind the scenes to get what they called the economic consensus.

It becomes more obvious daily that the arm-twisting had only a very temporary effect. Governments, unions and employers have very different ideas as to just what the consensus was. Much sophistry is used to obscure this point but the fact remains that the Prime Minister first said that there should be increases of 2.5 per cent but now suggests an increase of 4.3 per cent this year, while the ACTU is demanding full indexation and backdated application. The surprising thing is that within the terms of the accord the ACTU is in the right and the Government is trying to evade its commitment. On page 9 the accord states straight out:

. . . the adoption of a system of full cost of living adjustments will be strongly supported in tripartite consultations and before industrial tribunals.

That means supported by both government and unions. On page 5 the accord also states:

This document sets out the details of policies which will be implemented when a Labor Government is in office.

I repeat: Policies which will be implemented. Again, at page 11, the accord states:

On taking office the Government will substantially restructure the income tax scale to ease the tax burden on low and middle income earners.

At page 13 the accord also states:

In the event that economic or social circumstances at some future date necessitate, in the view of the Government, a general rise in taxation, the Government will discuss this matter with the unions before seeking to give effect to it.

Since coming to office the Government has maintained the tax scale and has effectively increased the amount of tax very many Australians will have to pay, without apparently discussing the matter with the unions. If that is the Government's attitude to the famous accord, it is not surprising that the unions are treating wage restraint and the suppression of sectional interest as, in Mr Ivan Hodgson's words, just a public relations exercise. The Prime Minister should come clean with the nation. He should tear up the whole accord and start again otherwise he will have what the British social contract became and what Mr Dolan has suggested could well happen-a free for all. That is something that this country cannot afford as long as the unions have monopolistic power in the labour market.

As the acknowledged linchpin of the Government's Budget strategy the efficacy of the prices and incomes accord is very much in doubt. It is certainly the greatest single concern and the cause of uncertainty in the private sector. Much is not being done in the private sector by way of planning, investment, expansion or even just ensuring business survival because of this uncertainty. But uncertainty as to this Government's intentions-its economic direction-is not confined to doubts about the incomes and prices accord. There is uncertainty amongst the aged who are worried about pension entitlements. There is uncertainty amongst pay-as-you-earn and corporate taxpayers who have been promised tax reductions. They have seen them disappear and they have had to face up to increased taxes instead. There is uncertainty in the defence forces where it is not known whether the Government will persist with its attitude towards the tax on lump sum superannuation payments. There is still further uncertainty amongst defence personnel about the Government's lack of commitment to defence spending.

There is uncertainty in the transport, cleaning, mechanical repairs and building industries because of prescribed payments legislation which imposes a withholding tax for the first time in this country's history. There is uncertainty about deficit spending and a likely accumulated national debt of some $70 billion if this Government goes its full term of three years. There is uncertainty about uranium mining and sales. There is uncertainty about resource rental taxes and capital gains taxes or other forms of wealth taxes. There is uncertainty in a whole range of endeavours which is heightened in this Budget. Most of all there is uncertainty about the employment prospects of many Australians. That uncertainty about jobs is not confined to the 700,000-plus unemployed. It is shared by many in work who are worried about their continued employment. This concern manifests itself in many ways. I give a couple of examples. It is evidenced by increased savings bank deposits. People are putting money aside for a rainy day. Young couples have withdrawn from the housing market--


Mr DEPUTY SPEAKER (Mr Millar) —Order! The honourable member's time has expired.