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Tuesday, 26 March 1985
Page: 826

Senator Dame MARGARET GUILFOYLE(8.27) —I congratulate the honourable senators who have joined us for the first time and also those who were re-elected at the last election. We have heard some fine speeches from the new honourable senators. I wish them well in their parliamentary careers. I hope that we will have the benefit of the diverse experiences and backgrounds which they have brought into this place and that they will find their parliamentary careers are of interest and fulfilment to them in their aspirations.

I have listened with some interest to Senator Richardson and his observations on the last election. His reference to a cartoon reminded me that there were not very many cartoons that suggested the Leader of the Australian Labor Party had won the election. They made one wonder why the polls had predicted there would be a 50-seat majority for the incumbent and how it was that, although Senator Richardson claims there was a formal vote of over 50 per cent for Labor on the two party preferred voting system, there was such a feeling of devastation among members of the Government Party at the result.

As for Senator Richardson's observations about the election of senators from New South Wales, nothing that Senator Richardson has told us would indicate that he was predicting that the Nuclear Disarmament Party would achieve the vote that it did. It will be interesting to see the outcome for a single issue party of that kind at any future election and the effect that it will have on the support that the Australian Democrats can attract. I imagine that the Labor Party in New South Wales and in other places where there was a strong NDP vote will be observing, in the same way as the Liberal Party of Australia will be observing, just how consistent the support would be for a single issue party, given the broad range of responsibilities that rest with the national Parliament and the decisions the major parties have to make on a whole range of issues.

We are speaking to the Address-in-Reply following the election of the new Government. I particularly want to address my remarks tonight to the matters that are raised in the Opposition's amendment that was placed before the Senate by Senator Chaney. There are a number of factors in that amendment to which I wish to speak briefly. First, I want to highlight the point that the Governor-General's Speech contains no cogent economic strategy at a time when recovery of the economy in this country is threatened by a record level of Government taxation and spending as a proportion of the gross domestic product, by growing demands for higher wages and other extra cost burdens on industry and by loss of value of the currency, reflecting world concern about Australia's competitiveness and the stability of the Government. Those matters are in the amendment that has been moved by the Opposition.

The Governor-General's Speech really seemed out of date at the time it was delivered. It might have reflected attitudes that were felt towards the end of last year, but by the time we got well into February there were many concerns about the Australian economy and the level of our currency and these things were ignored in the address given to us by the Governor-General on the opening of Parliament. For this reason, the Opposition is drawing attention to the fact that there does not seem to be any cogent economic strategy in the speech and it is important at this time to look at the state of the Australian economy and the matters which should be considered by all of us.

There were some pledges in the Governor-General's Speech and some of them were pledges from the Government towards strong economic and employment growth, particularly in the private sector. An attitude was expressed that the prices and incomes accord would continue to be the centrepiece of the Government's economic strategy. Explicit commitments were made by the Government on the deficit, relating to expenditures and revenue collections. There was, of course, a pledge for a major review of the taxation system in the principles that had been stated by the Prime Minister (Mr Hawke) at the end of October. These were quite strong pledges which had arisen throughout the election campaign and since the campaign. There was another interesting pledge, to move further unnecessary controls in the financial system and to increase the efficiency of the financial and business sectors. That pledge is of interest when one looks at some of the other regulatory approaches that are taken by the Government, for example in regard to wages.

In the Governor-General's Speech the trilogy was highlighted-the commitment of the Prime Minister on the Budget deficit, Budget expenditures and taxation. He gave a commitment that those three areas of Government responsibility would not be increased as a proportion of the gross domestic product in 1985-86 and over the Government's term. The promises were dragged out bit by bit, but eventually we finished up with that situation. Then, on 26 February the Treasurer (Mr Keating) gave a further promise when he made the statement that we would see a money reduction in the deficit in 1985-86 over 1984-85. This was an important tightening of the commitment by the Treasurer and he also promised that there would be no increase in the Medicare levy. Therefore, we have an agenda of the trilogy and significant promises about the levels of expenditure, the deficit and taxation as we go into the Budget period. It will be of great interest to all of us to see whether these goals are achievable, and if so how they are achieved, because of the way in which the deficit will have an effect in the economy and the way in which the level of budgetary expenditure needs to be curtailed in order to fulfil the elements of the trilogy that have been announced.

It was particularly interesting that, instead of showing firm control over monetary aggregates to re-establish market confidence in the Australian dollar, the Treasurer said on 26 February that the Government was not advocating a contractionary fiscal policy but that it was a government with a policy cast for growth. It seems to me that the growth we could well be talking about in the economy is a growth in unemployment, a growth in inflation and a growth--

Senator Button —You are one to talk; you would not know what economic growth was.

Senator Dame MARGARET GUILFOYLE — It could well be a growth in interest rates, too. Those are the growth factors that are now introduced into the Australian economy. If we are honest and look at it rationally we will acknowledge that fact. It is one thing to have talked last year about a trilogy that had that effect; it is another to ignore the international effect on the currency, the way in which other people now view our economy. A position in February which showed a combination of a loose monetary policy, a falling dollar, full wage indexation still being demanded and supported by the Government and further wage demands still being supported by the Government leads me to say that the growth we see could be a growth in inflation, interest rates and further unemployment.

Senator Button —And you are an expert on all three.

Senator Dame MARGARET GUILFOYLE —There were two problems associated with the Government's move in January to abandon the August Budget's monetary targets, however difficult monetary measurement had become. Firstly, in the short term an impression was given in the market that the Government had discarded an objective discipline because it had become politically uncomfortable for it to exercise that discipline. The second perception which developed was that the Hawke Government was not prepared to see interest rates rise to maintain a firm monetary policy. Senator Button may not like those things being said, but that is the perception and that is the effect of the policy as we have seen it this year. In the Treasurer's statement in which he gave us the growth in the monetary aggregates, the release of the January M3 statistics, he said that the Government had decided against the further tightening of monetary policy which would have been required to achieve the Budget time M3 projection. In announcing that decision, he emphasised that the monetary aggregates did not appear to be providing a reliable guide to underlying monetary conditions. He said:

The Government remains committed to non-inflationary monetary policy and the authorities will be maintaining an appropriately firm stance; and the whole range of monetary aggregates and other indicators of monetary conditions, as well as trends in the economy generally, are being monitored in the setting of monetary policy.

That was his statement and I have made reference to it. The effect of it on the market place was one of concern and one that was fairly expressed in the remarks that I have just made.

I turn now to another point in the Governor-General's Speech-the prices and incomes accord. The Governor-General said that this would continue to be the centrepiece of the Government's economic strategy. I think it is pertinent to link with this the statement, also in the Speech, that the Government would move further unnecessary controls in the financial system and increase the efficiency of the business and financial sectors. It is significant that over the period of the Hawke Government the Australian wages system has become rigidly centralised under the prices and incomes accord. This is not helpful to job creation or to combating youth unemployment. However much we might put forward policies which are part time solutions to unemployment for youth and which might create some temporary jobs, with the wages system as rigidly centralised as it is and with the conditions that apply to employment in this country, it is extremely difficult for us to overtake the youth unemployment which is of such grave concern.

It is curious to see the deregulation of the financial system, which has been one of the Government's pluses, and yet find such a regulatory approach to the wages system. There will not be sustained economic recovery and more jobs in the private sector if the terms of the accord are continually applied. The Australian Council of Trade Unions has acknowledged that its concern is for those who are employed and not those who are unable to find employment. It is also acknowledged by the ACTU that full wage indexation is a luxury not enjoyed by any other trade union movement in any other country. It is curious to me that there should be an insistence on wage indexation in this country, despite its economic effects, when it is an advantage on anything enjoyed in any other country. Yet the ACTU wants more. As well as having full wage indexation, a benefit beyond that enjoyed in any other country, it wants superannuation, job redundancy improvements, supplementary wages, and now equal pay for comparable work. Australia still has 9 per cent unemployment. 50 per cent higher than that of most of our trading partners, and it is those included in the 9 per cent unemployed who are of concern. When one looks at the provisions of the accord and considers that it is central to the economic policy of the Hawke Government, one must express concern at the Speech made at the opening of the Parliament. These words appear on page 412 of the document containing the accord:

Accordingly it is agreed:

A centralised system of wage fixation is desirable for both equity and industrial relations reasons and will be advocated by both parties. To protect the purchasing power of wages and salaries the adoption of a system of full cost of living adjustments will be strongly supported in tripartite consultations and before industrial tribunals.

Other points in this section of the accord include:

In formulating claims for improved wages and conditions at the national level the unions will have regard to government economic policy and will consult with the Government on the amount of such claims.

Both parties recognise that if the essential conditions of the centralised system are met that there shall be no extra claims except where special and extraordinary circumstances exist. The no extra claims provision will apply to both award and over award payments.

That is the part of the accord that ought to be stressed, not what more we can receive out of the wages system and for what more can we ask. It is pertinent for anyone to ask at this time whether the Government will stand up to the unions and argue its economic policy at the national wage hearings that are to take place. The record shows a Public Service dispute that was very debilitating to the economy and that the Minister for Employment and Industrial Relations, Mr Willis, dealt with it in a way that led us to believe that it was an anomaly case. As I said earlier, the claim for equal pay for comparable work is now being proposed by the ACTU. That is of grave concern to employers as they look to how they are to move to the profitable employment of those to whom they are able to offer permanent work. It is somewhat of a moveable feast on the Government's approach to wages policy resulting from the devaluation of the dollar. We find various quotes from the Prime Minister, Mr Hawke, the Treasurer and the Minister for Finance, Senator Walsh, on these matters. For instance, when on 25 February the Australian Labor Party-ACTU accord was locking the Hawke Government into an economically irrational approach to wages, the Opposition asked the Prime Minister in the other place:

Is the Prime Minister 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 devaluations on the consumer price index?

The Prime Minister said that this was a valid question and yet the response in this place from Senator Walsh was that it was an audacious question. There seems to be very little consensus in the Government in the handling of a key economic question concerning wages policy. It is of concern to those interested when the Government approaches something as central to our economic health as the wages policy in this sort of way. It is no wonder that the headlines on 26 February indicated that business was bewildered by the Hawke wages view. Naturally, that sort of approach was felt by those who were looking to the Government for leadership on matters of such grave importance as the economic viability of their own businesses.

Another matter highlighted in the Speech of His Excellency the Governor-General was the tax summit. This has probably been the most discussed matter since the Prime Minister stumbled on it as a solution during the campaign. He was unable to deal with questions relating to the Government's tax policy and so stumbled into a commitment to a tax summit. The tax summit is occupying the minds of many at the moment, including the Prime Minister. Business also is interested in what will occur at the tax summit. It is one thing to say that the tax summit will look at the mix of tax-at whether we will have more personal tax or more indirect tax-but business is interested, as far as tax policy is concerned, in whether the summit and any changes that might arise from it will focus narrowly on tax and ignore the level of government expenditure. I was interested to read and hear Senator Walsh's comments on this matter. It would seem that the Government is giving very serious consideration to the level of government expenditure, and it would be hoped that the trilogy commitment at least will be able to be achieved by the Government.

Business is interested to know what focus on company tax will arise from the summit. The costs of wages and wage conditions and government regulation all impinge on corporate growth. As inflation rises when the effects of the dollar devaluation become evident, the dollar could weaken even further and, if we accept the Prime Minister's approach to wage fixation under the accord, the lack of confidence in this Government already evident in the commercial sector will intensify. Unless there is a real effort by the Government to recognise and ensure that high standards of living depend upon a solid dollar, a solid currency, and keen competitiveness as well as low inflation and realistic wage levels, the future can only look bleak. The Government cannot ignore these factors at a tax summit because again they are central to economic policy. The only sound we seem to hear from the Government at the moment with regard to the tax summit is the sound of a tax reform package. I would argue that the tax summit must focus on the level of government spending and on the political will that the Government can show in the structure of the 1985-86 Budget.

The February 1985 edition of the Business Council Bulletin makes this interesting comment:

The Governments Trilogy of commitments for the 1985-86 Budget are supported by the Business Council as the minimum necessary contributions to sound economic management. Analysis of projected receipts and expenditures in current or already announced programs made by the Business Council is presented. It suggests that these commitments will require a cut in expenditures (including payments to the States) of about two and a half billion dollars, with any new initiatives being offset by further cuts. A deficit outcome, on this early analysis, would be $5.5 to $6.0 billion. While the expenditure reduction task is admitted to be extremely difficult in political terms, understanding is called for from the whole community including all who will be affected in the short term. The social as well as the economic benefits outweigh the costs, and unless action is taken now more traumatic decisions will be required in later years.

That is its view with regard to the casting of this Budget. It is also of interest that there is confusion in the sounds that come from the Ministers of the Government and the Prime Minister. The Prime Minister, a week or so ago, commented along the lines that it may be more damaging to abandon the summit than it will be to have it. That seems to be a fairly shallow way for the Government to approach something so central to its proposals for the future. Today, the Melbourne Herald talks about the Prime Minister's visit to Canada. It states:

The Canadian Prime Minister had invited Bob Hawke to explain how his economic summit had steered Australia down the road to recovery. But the main thing Mr Mulroney heard from our master of consensus was a reading from the Hawke theory of political pragmatism.

Not that Mr Hawke was not enthusiastic about the Canadian summit, although he did warn Mr Mulroney that they don't always work. For example, Mr Hawke said Australia's national tax summit in July would not necessarily lead to tax reform. Such words are not new from Mr Hawke, but they are a fresh indication of what is to come.

We wonder how serious the Government is with regard to the tax summit; whether it will put something forward which it hopes will be accepted, or whether it is looking for some consensus, particularly in view of the further reporting today in the Australian Financial Review and other newspapers which speak of the ACTU position paper on tax reform. The headline in the Australian Financial Review is 'ACTU Position Paper Sets Scene for Hard Talking. Tax Reform: Now the Negotiating Begins'. This article and others today point to the fact that the ACTU has become a crucial element in tax reform because negotiations will need to be held with it on indirect taxes. The article states:

As a key player in the poker game atmosphere developing in the run-up to the July national tax summit, the ACTU's position on such issues as indirect taxation-and a host of other issues canvassed in the paper-have taken on added weight.

We are facing a tax summit with no agreed position from the Government on changes to indirect tax. There is no message from the Government on the way it will deal with corporate tax. The Prime Minister is telling people in Canada that 'you do not really get results out of summits' and we heard the comment from him a week or so ago that 'it may be more damaging to abandon the summit than to hold it'. If we are to set ourselves to any realistic taxation reform, it will obviously not be achieved in the way in which the Government is approaching the summit. I hope that, if it is not approaching taxation reform in a realistic fashion, it is facing that casting of the expenditure side of the Budget in a realistic way. I quote again the figures given by the Business Council of Australia in its review of what ought to take place in the Budget, that is a cut of something like $2.5 billion to achieve a deficit of about $5.5 billion to $6 billion.

The Governor-General's Speech at the opening of Parliament outlined some of the reasons why the Opposition felt that it should move an amendment along the lines of some of the points I have raised this evening and the other points that were made on foreign affairs and defence matters. It was of concern to us that the Governor-General's Speech failed to reassure the Australian people that the country's defence arrangements within the Western alliance will be preserved and strengthened following, firstly, the Prime Minister's capitulation to internal party pressures on the question of Australia providing logistical assistance to the United States for its testing of the MX missile and, secondly, increasing uncertainty on the future of the ANZUS Treaty, fuelled by members of the Labor Government, including a Cabinet Minister. Those matters of foreign affairs and defence are of concern to us and we draw attention to them in our amendment. The other matters I have mentioned, such as the lack of cogent economic strategy, are important and deserve serious debate in the months leading up to the tax summit and the Budget for the forthcoming year. I commend the amendment moved by Senator Chaney. I hope those matters raised by me and by other Opposition speakers will have the attention of the Government. They focus on what we regard to be serious issues in the new Parliament.