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Monday, 25 February 1985
Page: 105

Senator CHANEY —Is the Minister for Finance aware that any benefit to the competitive position of Australian industries from the recent devaluation of the dollar will be irretrievably lost if resultant cost increases are passed on by means of full wage indexation? Will the Government argue before the Australian Conciliation and Arbitration Commission that any future national wage increases should be discounted to take into account the effect of the devaluation on the consumer price index?

Senator WALSH —Senator Chaney correctly draws attention to the possibility of the potential benefits to exporting industries and, indeed, to importing industries flowing from devaluation being lost if there was a subsequent wage explosion which eroded them. I must say that I find it incongruous, to say the least, that a senior representative of a former government, which presided over the greatest explosion of wages which Australia had seen for a decade, at a time when the present Leader of the Liberal Party, Mr Peacock, was Minister for Industrial Relations and the present Deputy Leader of the Liberal Party, Mr Howard, was the Treasurer, should make such comments. It was a wages explosion of such dimensions that it destroyed the international competitiveness of the Australian economy.

It was not until this Government came into power that an agreement on centralised wage fixing system was sought and adopted, in particular one which by prior agreement did not make adjustments to wages for the effect on the CPI of the Medicare arrangements. I find it incongruous, with this Government's record in containing wage increases, compared with the irresponsible stewardship of the previous Liberal Government, when the two key positions were held by the present Leader and the Deputy Leader of the Liberal Party and when they allowed a wages explosion in mid-1981 and succeeding years, which, coupled with one or two other factors, had the effect of destroying one-quarter of a million jobs in the Australian economy, that a representative of that political Party should have the audacity to raise this question in a tone which is critical of this Government. However, if one can overlook the audacity and the hypocrisy--

Senator Townley —Mr President, I take a point of order. We now have an increased Senate. We have what I regard as a very short Question Time. We have to put up with repetitive rubbish from the Minister--

The PRESIDENT —Order! What is the point of order?

Senator Townley —The point of order is that the Minister is being repetitive and he is going on too long.

The PRESIDENT —Order! Senator Townley will know from his long experience that the Chair has no control over the length of a Minister's answer. However, I draw the Minister's attention to standing order 100, which states that Ministers should not debate their answers. I call the Minister for Finance, Senator Walsh.

Senator WALSH —Thank you, Mr President. There is a possibility that import price increases caused by devaluation of the Australian dollar will feed into the consumer price index. Indeed, one can say that there is a certainty that they will feed into the consumer price index to some extent. In regard to estimates following previous devaluations, I have particularly in mind the major devaluation of the order of 20 per cent which the Fraser Government made when it first assumed office, and a subsequent major devaluation when this Government first assumed office. That was forced upon us because of the sabotage of the Australian economy by the present Leader of the Liberal Party in the weeks leading up to the March 1983 election, when he said that under Labor there would be a flight of capital out of this country. Some people were silly enough to believe him and there was a flight of capital out of the country. We were put in the position that we had to devalue the dollar. However, the effects of those devaluations on the CPI through changed import prices were much less than had been predicted by reputable commentators at the time. I will discuss this matter with the Minister for Employment and Industrial Relations, whose prime responsibility it is, along with the Treasury, and ask whether he has anything to add to the answer I have given.

Senator CHANEY —By way of a supplementary question, I would remind the Minister that in his reference to the old days he seems to have forgotten that the Government now claims it has a new approach to centralised wage fixing which will solve a great number of Australia's economic problems. The Minister has conceded that there is a certainty that to some degree import prices will affect the CPI. Will he address his mind to the question whether, if those CPI increases are fed into the wage system and there are wage adjustments, that will remove the advantage gained for Australian industry by the devaluation. I ask him again whether he thinks the Government should argue before the Conciliation and Arbitration Commission that any future national wage increases should be discounted to take into effect those particular CPI changes.

Senator WALSH —Senator Chaney is quite wrong in suggesting that the advantage gained by Australian exporters and import competitors would be removed-that is the word he used-if the consequential CPI effects of changed import prices were allowed to feed into wages. It is a matter subject to arithmetical proof that the advantage given to import competitors and exporters is directly related to the movement in the exchange rate. At the most, the effect on the CPI of a change in import prices would be a small fraction of that figure, and a smaller fraction than a simple calculation of the import component of the CPI regimen would suggest.

As to whether the Government should argue for a discounting, which was the essential part of the question, it is attractive perhaps to argue that that should be done, but I would remind Senator Chaney and others that I do not believe any particular item affecting wage determination should be considered in isolation from all the other items and all the other trade-offs that might be achieved. I think that is one of the factors which the Government should take into consideration; but it is better, as the record of the last couple of years surely would have demonstrated, even to members of the present Opposition, to have a wages system which is under some control than the sort of wages system which operated in the last couple of years of the previous Government and which was completely out of control. Therefore, it would be simplistic and wrong to say that, because this change has taken place, the Government must argue trenchantly that a corresponding adjustment has to be made. That is one factor which, along with many others, should be considered in determining the Government's position.