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Wednesday, 15 September 1971
Page: 1340

Mr DUTHIE (Wilmot) - The Budget is not solely an annual record of expenditure and estimated receipts for the coming financial year. It is the most powerful economic weapon in the hands of a government and this powerful economic weapon will decide the fate of all Australians during the next 12 months. It will decide also the level of security to be enjoyed or otherwise by every family in Australia. No more powerful weapon is wielded by a government than its annual Budget because, through it, a government works out its economic theories and its financial policies. Therefore, it is the concern of every Australian to try to understand the Budget. In trying

This Budget is designed to hold down excessive expenditure in order to control inflation and yet keep the body politic alive and healthy. I believe that it is far too deflationary and already there can be seen the effects of this Budget on the economy in the 3 months since it was framed by Treasury officials. In its clumsy attempt to combat inflation, the Government will increase unemployment everywhere. Already, the sad decline in rural industries is adding to the quota of unemployed in Australia. On top of this, the squeeze on manufacturers will further aggravate the situation as I will point out shortly. After all, inflation is to be preferred to deflation. In a deflationary situation, thousands of people are out of work which means that less food is sold and therefore the farmers suffer as consumption declines. The demand for every conceivable item that is used in a home, that is worn, etc., is depressed the moment there is a state of vast unemployment. So, inflation is much to be preferred to deflation. Of course, when saying this, one must weigh the effect of inflation on the fixed income earner. In this sense, inflation is like a thief in the night for it means that rising costs must be borne by people who do not have rising incomes. In that respect, inflation is a menace but when taking the overall picture it is preferable to deflation.

Massive unemployment is criminal in this modern world and it is creeping up again on all countries with alarming suddenness. At present 950,000 people are unemployed in the United Kingdom and several millions are out of work in the United States of America. The wage and salary earners are always the victims of anti-inflationary measures. Will this Budget do what it was designed to do? I do not think so. I think that even in the period since it was introduced, it has been proved that the Budget has not done what it was supposed to do. The effects are quite frightening as has been shown by 2 recent surveys which were published in this country on 9th September, only last Thursday. The quarterly survey of industrial trends by the Bank of New South Wales and the Associated Chambers of Manufac tures of Australia showed that manufacturers had experienced many of the elements of a recession in their activity over the past 3 months. Figures of anticipated new capital expenditure by industry issued by the Commonwealth Statistician showed that manufacturing industry expects to cut back sharply on its investments over the 6 months from July to December this year. Economic observers say that this shows the Government has blundered and miscalculated in its Budget strategy because the Treasurer (Mr Snedden) predicted an upsurge in private spending and so introduced restraints in the Budget mechanism to counter this. But the upsurge did not eventuate and the effect of the Budget was to shatter business confidence and once that is shattered, things become serious. Manufacturers, already feeling the effect of the squeeze in February, became even more pessimistic. The ACMA and Bank of New South Wales survey said:

Manufacturers' outlook for planned capital expenditure in the next 12 months is the most pessimistic since 1961.

Of course, the credit squeeze was introduced in that year. The gloomy outlook from this major economic indicator is backed up by the Commonwealth Statistician. His official figures suggest manufacturers' spending on new capital equipment will rise by only 2 per cent over the next 6 months. This compares with a rise of 13 per cent in the 6 months to June this year, which represents a decline of 11 per cent from the beginning to the end of this year. Australian manufacturers employ 1.4 million people - about a third of the Australian work force - and when their capital spending is cut back it causes a multiplied slowing down of economic activity within this large sector of the economy.

According to the ACMA and Bank of New South Wales survey, which as I said was published last Thursday, only 38 per cent of manufacturers were working at a satisfactory full rate of operation. This is the lowest proportion since the survey began asking this question in 1964. Even more disturbing to the House and to the country is that according to economic observers 40 per cent of those surveyed expect the general business situation to deteriorate in the next 6 months. Only 14 per cent of those questioned expected an improvement. Economic observers therefore say that stagflation psychology has taken a grip on the manufacturing sector of our economy, with quite frightening results. Therefore, the Budget was unnecessarily cautious and deflationary.

The price paid is unnecessary unemployment. Mr Snedden's wage bogy, described as 'a powerful upthrust of costs stemming largely from large wage claims relentlessly pursued,' was not backed up by wage statistics. Official figures issued after the Budget showed the average weekly earnings for men in the June quarter at the smallest rate of quarterly growth for 2 years.

Yet, the Treasurer claimed that the upsurge of wage increases was one of the reasons why he brought the hammer blows down through his Budget. The statistics show that he is miles out in his thinking. The wage increase in that June quarter was the lowest for 2 years.

Economic observers expected the effect of wages on costs to ease. They say other indications are that the Budget's demand bogy was another unnecessary fear.

The survey which has just been completed shows that 2 out of 3 manufacturers in Australia are operating well below capacity. I feel that the results of this survey are frightening when it is considered that they come only 3 months after the Budget was drafted. The article to which I have referred states that obviously, the Government now must take early action to get manufacturing rolling forward again. The sooner it does so, the better, because our economy depends upon it. Economic observers say the problem facing the Government now is when to stimulate the economy. It will have to act before other Budget measures take effect.

The Government will not do so speedily because that would be an admission that the Government was at fault in the Budget that it presented. The Government might do so by indirect methods, quietly and slowly, over the next few months to counter the deflationary effect that the Budget has had.

Mr James - It would be better to get out.

Mr DUTHIE - That is right. It should resign while there is yet time. This survey presents a very frightening picture of the situation that exists only 3 months after the Budget was put into final form by Treasury officials.

The next matter with which I wish to deal is shipping and its effect on the Tasmanian economy. Unemployment in Tasmania has risen to 1.69 per cent, the highest level in Australia. Nearly 3,000 are out of work at the moment. Associated Pulp and Paper Mills Ltd, the biggest paper manufacturers in Tasmania, has sacked 263 men in the space of some 3 weeks. That is about one-fifth of its total work force. It has done so largely because of competition from imported paper. Its paper, by the way, is first class writing paper and not paper for the printing of newspapers. Newsprint is manufactured in the southern part of my electorate at the big Boyer mills at New Norfolk.

The unemployment situation in Tasmania is worsening because of the fact that the Australian National Line has increased freight rates by approximately 25 per cent in the last 12 months. The ANL carries 85 per cent of Tasmania's imports and exports. Therefore, the effect of such an increase on our economy is enormous. But the amazing fact about the ANL is that, since 1957, its total profit has been $27m. In only one year did it suffer a deficit. When this happened, it pressed the panic button and freight rates increased by approximately 25 per cent in the year following its first deficit. That deficit occurred largely because the ANL entered the Japanese-Australia trade, not because of any losses on the Tasmanian run. The adding of this freight increase to the cost of goods imported and of produce exported has had an enormous effect on our economy. This strangulation effect is showing itself already in that for one thing, it has discouraged new industries.

The Senate established last year the Senate Standing Committee on Primary Industry, Secondary Industry and Trade. Its first inquiry concerned the Tasmanian Shipping Service. That Committee went into this problem. To me, its report of 105 pages is most disappointing. The Committee tells us little that we do not know already. It certainly has not recommended that a freight subsidy should be paid by the Commonwealth Government to assist Tasmanian shippers and the Tasmanian economy. It is vital to our manufacturers and our primary producers that they enjoy a competitive status equal to that of their mainland rivals. The more freights rise, the less chance Tasmanian manufacturers and primary producers have of competing with their mainland rivals who enjoy road and rail transport alternatives that Tasmania does not have.

Already this Government is paying a shipping subsidy, but not to Tasmania. Looking through the Budget documents, I discovered that, in the last 5 years, our Federal Government has paid $1,101,000 to subsidise the South American shipping service. 1 remember this shipping service being established, but I had not looked at it in recent years and quite overlooked the fact that it existed on a Commonwealth subsidy. If the Commonwealth can do that for the company that operates that service, why cannot the Government do the same thing with respect to ANL services between Australia and Tasmania? After all, the ANL is a government line. The Government has been hiding the fact of this subsidy. One must study the document Public Authority Finance - Commonwealth Authorities 1970-71' to discover that little piece of evidence.

My next point concerns local government which is not dealt with in this Budget. Local government is overloaded with responsibilities and is starved for finance right throughout Australia. It must meet high interest rates in respect of many of its borrowings. The amazing fact is that about 23 per cent of rates collected by local government authorities is being used up to pay for loan charges. Rating upon individuals has almost reached saturation point. I wish to comment on one or two interesting points in this respect. Rates today cost Australians $4.43 for every $1 that they cost 20 years ago. For every $1 paid in rates even only 2 years ago, each ratepayer now pays $1.15. For every $1 that councils owed 20 years ago, they now owe $8. Councils had to use 21.8c in every $1 of their rate revenue, not to provide new services or to maintain existing ones, but to service debts. This figure is higher in many individual cases.

It is obvious that a new look approach must be adopted with respect to local government which is the grass roots government in Australia. There are approximately 925 local councils and city councils In Australia. The Commonwealth,

I think, should introduce some sort of loan council for local governments. It should adopt the same approach to this type of Government, which is the basic form of government, as it does to State governments. Local government is the form of government that is closest to our ratepayers and electors. I do not think that it is right that ratepayers should be required to pay higher and higher rates for the services that they need. I believe that town sewerage and town water schemes should be handed over to the State governments and thus taken right out of the hands of local governments altogether. If these 2 items alone were removed from their control, local governments could survive. If these great increases in costs continue local governments in this country will be strangled. I think that the Labor Party when it comes into government will do something about setting up a loan council for local governments. We will consider creating the money for that loan council to commence operations. The loans will be made to the local government bodies after annual consultation with the authority that is set up so that they may be put on a proper business footing financially.

Mr Clyde Cameron (HINDMARSH, SOUTH AUSTRALIA) - We will consider it.

Mr DUTHIE - I agree. We will consider it, anyway. 1 turn finally to tourism. This matter does not come specifically within the terms of the Government's Budget, but I wish to say one or two words about it. Every person who visited Australia in 1967 spent an average of $300. Spending by each visitor to Australia has risen now to an average of $400. In 1969, Australia earned $116m from tourism. It is estimated that, by 1975, income from tourism will increase to $300m. It is expected that approximately 700,000 visitors will come to Australia in that year. It must be recognised, I believe, by any government, that development of tourist potential is the world's biggest single business. In fact, tourism on the international level is now the largest single item in the trade.

Mr Clyde Cameron (HINDMARSH, SOUTH AUSTRALIA) - You have a casino now which must help.

Mr DUTHIE - We have only one. We do not have one in the north. In fact, in

Debate (on motion by Mr Turnbull) adjourned.

Sitting suspended from 6.1 to 8 p.m.

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