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Tuesday, 3 May 1994
Page: 43

Senator GIBSON (4.54 p.m.) —I wish to speak on this matter, which is a most serious one for all Australians. No government can create sustainable jobs. Those jobs can only come from strong economic growth—underpinned, in turn, by a high level of private sector investment. On the other hand, governments can destroy jobs. This government stands guilty of that by virtue of the fact that it created the longest, deepest recession in more than 60 years.

  The depth and the length of the recession could have been avoided. As Treasury Secretary Ted Evans said, `The level of unemployment is a matter of choice.' This government made the wrong choice. It ignored prudent fiscal policy, sensible tax policy and a more concerted effort in freeing up the labour market. Instead, it opted for the `easy' strategy of increasing interest rates to choke off demand.

  We also have in this country a major investment crisis. Although we welcome increased economic growth, which is good to see, we know that there is a fundamental problem as to whether it can be sustained. The level of investment in plant and equipment in this country today and for the past two years is at six per cent of GDP—the lowest since World War II. It should be 10 per cent instead of six per cent.

Senator Murphy —How about profits?

Senator GIBSON —Nonsense! This is investment that I am talking about and people have got to invest if we are to have sustained growth. Tomorrow's employment and industry statement seems destined, from all accounts, to tie itself to the all too familiar Keynesian solution to unemployment which has been practised by Labor governments for many years—that is, spend taxpayers' money to create artificial jobs. That solution was tried by the Whitlam Labor government in the early 1970s and was found to be an economic and political disaster.

  It is this type of policy over the past decade or more that has created the boom and bust situation which has become the trademark of this government. Nowhere in any sneak preview of the white paper is there any mention of growth or investment, I believe, as possible solutions to the unemployment problem in this country. Nowhere does it seem that the government has taken notice of the comment by the Governor of the Reserve Bank that there is a greater need for a growth compact than a jobs compact. Only sustainable growth in the economy can result in new, lasting employment. That is not to say that the problem of long-term unemployment cannot be assisted by properly targeted labour market programs.

  The major factors which are important to a return to full employment were concisely summarised by the OECD Forum for the Future, held in Paris early this year. The key points were:

Much improved rates of economic growth are deemed essential; labour costs—especially non-wage labour costs—need bringing down.

That is true of the training guarantee levy.

Rigidities of the labour and labour markets need loosening up.

What has the government done about that aspect?

Greater efforts are called for in education and training.

Many economists and financial commentators, such as Helen Hughes and Richard Blandy, have suggested that the commonsense solution to unemployment lies in generating much stronger economic growth—in the vicinity of six to seven per cent. We should remember that back in the 1960s that is the rate at which Australia grew. Our Asian neighbours are all growing at that rate or even higher right now. The last time that we were coming out of a major recession, in the early 1980s, we were growing at six per cent, 2 1/2 years from the bottom of the recession. Now we are growing at only four per cent, which is not good enough.

  Further economic growth is certainly at risk. What do we need to do to fix it up? First we have to free up the labour market. But what has the government done on that score? It took the dictates of the ACTU, despite the fact that last April the Prime Minister (Mr Keating), in recognising the problem, said that he would free up the market, but the Brereton legislation makes it even more difficult to employ people.

Senator Murphy —What would you do?

Senator GIBSON —Free up the market.

Senator Murphy —Tell us how?

Senator GIBSON —It is easy. Remove the restrictions and allow people to get together, without union pressure, to make their own genuine enterprise agreements by choice. That is what has to be done.

  Secondly, the government can reduce pressure on financial markets by reducing the budget deficit to less than $10 billion. Going beyond that, it can aim for a surplus within two years. In the mid 1980s the Labor government ran a surplus. That period was one of high investment and high job growth. Surely those opposite can learn from their own experience. But now Australia has a much higher debt level than it had in the middle of the 1980s. As Senator Short said, we have the highest debt level per capita in the world, so we are in an even more fragile state now as compared with a decade or so ago.

  Why had the money markets lifted the bond rates over two per cent in the last couple of months? The lift in the USA over the same period was only 1.3 per cent. Why that extra margin when our inflation is lower than theirs? It is because the world financial markets regard Australia as being a greater risk. If we want jobs growth the government has one option: reduce the deficit and aim for a surplus as quickly as possible.

  The third area of growth that the government has not chased is micro-economic reform. It started off on ports, electricity, gas, transport and telecommunications, but it has lost the game; it has not carried through. Unions frightened the government off. The fourth area is to reduce government expenditure and thereby reduce taxes and encourage investment, encourage business activity. The government has reduced the income of the states. The Commonwealth should have done what the states have done, but the Commonwealth in the last three years has increased its expenditure by 15 per cent. The 800,000 businesses around Australia have had to reduce expenditure. We saw last night an example of waste on the Four Corners program about DEET.

  If Labor in its 11 years in office had, first of all, freed up the labour market, secondly, pursued micro-economic reform in transport et cetera, thirdly, reduced government expenditure, and, fourthly, used the taxes to encourage business investment instead of to discourage it, then the white paper would not be necessary. The proposed spending spree is a recognition that after 11 years in office Labor's policies have failed.