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Wednesday, 28 March 1973
Page: 785


Mr SNEDDEN (Bruce) (Leader of the Opposition) - There is no question that inflation is one of the most serious problems facing Australia today and certainly is the most serious economic problem. Inflation misallocates resources, erodes savings, puts at a disadvantage the economically weak and aids speculators and those prepared to exploit ruthlessly their industrial power. It is a cancer, eroding proper balanced and rational economic development. But it comes down to the question of how serious we, as the Australian people, are in our determination to handle inflation, how capable and genuine we are and how realistically we approach the problem. No economist would argue the proposition that price increases can be isolated and identified as an element for treatment without affecting a whole range of other questions. No policy can be undertaken on an issue without considering the reverberations of that action on the whole mix of economic, political and social factors that are affected by it. No treatment of the problem of inflation - that is, of price increases - can be properly predicated on the simplistic premise that prices can be meaningfully controlled by dealing with the question of price rises alone without dealing with their cause. But the whole Labor movement and its instrument, this Government, is doing just this. There is this myopic concentration on prices alone. Price increases have other things behind them. Is it the improper extension of profit which is the basic cause of inflation today? Are costs pushing prices, or is it competition for resources by an excess of demand over availability of commodities? Systems which deal with prices alone beg these important questions. I have repeatedly said that the Labor Party approach to inflation is a cosmetic sham. This is all the Price Justification Tribunal will be. This is from an understanding of its workings that have been stated so far. This is all that a committee of Parliament on prices will be - a pretence at dealing with the problem.

What are the causes of inflation today? Anybody who thinks that rising prices have been the result of capitalistic greed might contemplate figures drawn from the White Paper on National Income and Expenditure. Wages and salaries between 1969-70 financial year grew from about $ 15,500m to about $20,000m in the 1971-72 financial year - an increase of almost one-third in the base figure. In those 3 years company income declined in absolute terms. If we look at a comparison between wages and salaries and supplements as a percentage of the national income we have some indication of what is happening. The National Accounts Statistics reveal that in 1948-49 wages, salaries and supplements accounted for 60 per cent of national income. In the financial year 1971-72 it was 70 per cent, an increase of 10 per cent during that period. The table of figures which 1 shall seek leave to incorporate in Hansard shows the increases in average weekly earnings in comparison with movements in the consumer price index. It shows how increases in average weekly earnings over the last 15 years have been dramatically higher than the consumer price index movements over the period and particularly in recent years. I have a table which gives the figures from 1956-57 through to 1971-72 with movements in the consumer price index in one column and average weekly earnings per employed male unit and the percentage increase on the same period of the previous year. I seek leave to incorporate this table in Hansard.

Mr DEPUTY SPEAKER (Mr Lucock)Order!ls leave granted? There being no objection, leave is granted.

Mi SNEDDEN- I thank the House. (The document read as follows}-'


Mr SNEDDEN - 'Labor Party apologists keep attempting to distract from the issue by insinuating that the Opposition blames increases in wages and salaries as the sole cause of our inflation. This is not true. Neither 1 nor any member of the Opposition has said that. I have said that wages are the prime cause of our current inflation, and the orthodoxy of respectable economic opinion totally agrees with me on that proposition. It is only members of the Labor Party, because of their power position, who are unable to make that objective statement. They know it, but refuse to acknowledge it. The Organisation for Economic Co-operation and Development, in its survey on Australia recently published, said:

The basic cause of accelerating price inflation in recent times has undoubtedly been accelerating wage inflation, first mainly, through wage drift, and then from late 1970 increasing through wage awards by arbitration authorities. lt continued: . . concern with inflation will need to move to top priority in the Federal Government's list of economic problems.

In those 2 statements clearly the OECD is saying that the Federal Government must be concerned with accelerating wage inflation. Each utterance gives new momentum to the process which exacerbates wage inflation. Of course this comes as no surprise to us. The lack of objectivity of the Government was tangibly demonstrated right throughout last year's election campaign. Its pamphlet, which was entitled: 'It's Time - Prices' was a prime example. It said:

Prices go up - you get fleeced at the supermarket - that's what inflation is all about.

This is a myopic concentration on prices. The Opposition says that when prices go up there is a cause. That is what inflation is really all about. If a kettle is boiling over one does not stop it by forcing the lid down; one removes the source of the heat. That is what inflation control is all about. The pamphlet goes on to repeat the utter nonsense that has been used to justify a one-sided approach by trade union leaders, particularly by Mr Hawke, President of the Australian Council of Trade Unions and Vice-President of the Australian Labor Party - with a mere echo by the Minister for Labor (Mr Clyde Cameron) - the fallacy that maximum wages and salaries are controlled.

The arbitration system establishes minimums and this protects the economically weak. These minimums do not represent wages control at all. They set the base from which over award payments and improved conditions are negotiated. The Conciliation and Arbitration Commission does not control wages; it sets a minimum which is the platform from which increased wages accelerate. The wage drift is very considerable. The arbitration system protects wage earners; it does not constrain them. It was not created to hamstring wage earners; it was created to protect wage earners. To maintain that the Arbitration Commission holds down wages must cause a wry smile when we read of strikes to force higher wages and a refusal to go to arbitration. Is there not a person in this House who does not read almost daily of a refusal to go to arbitration and to force a wage or conditions increase by direct action of strike? This causes a wry smile, but it is not very funny.

Why do trade union leaders, many in the highest positions in the Labor Party, continually say: 'We will not go to arbitration.'? They constantly do this. Why do they continually say: 'We will enforce our claims by direct action'? Have they not been successful in enforcing their claims by strike action - that is, if they possess industrial power? Only those unions with industrial power can enforce claims. What the trade union movement and the Labor Party are acquiescing in is the creation of class distinctions in this community among wage earners, depending on whether as an organised trade union they possess industrial power. Any member of the Labor Party who talks about a classless society is talking against what is being done. There is a constant willingness by the Labor Party in government and the trade union movement to ignore the claims of the industrially weak, but on the other hand to pay obeisance to the demands of the industrially strong.

The fallacy of wage control should not have survived so long as it has, but it has been constantly put as a propaganda exercise and it has sunk into people's minds. It should be eradicated from their minds because it is the very people who are going to be harmed by inflation who are economically powerless. It was the economically powerless who elected this Government to office. The Government will ignore the proper claims of those people who elected them to office. The Labor Party is continuing to co-operate, as a government, with the ACTU in distracting attention from the current economic orthodoxy from which we are suffering - a cost inflation largely based on the wage push. This is not deniable, and anyone who claims to deny it is not arguing from fact but from the position of being commanded by the political power of unions. Members opposite have attempted to abuse our intelligence by seeking every other explanation but the real one. The most fanciful and most desperate attempt to distort the issue occurred last year when they latched on to the thesis of a discredited American academic. This is called the Johnson thesis. This thesis said that essentially inflation was caused by Americans financing the Vietnam war and by some means caused by that was exporting inflation to other countries.

Firstly, that could relate only to demand inflation and our problem has been cost and wage inflation. Secondly, there is no explanation of how this inflation could have been transferred to Australia. But now that the Vietnam war is over what is the current Labor orthodoxy for our burgeoning inflation? What excuses will it find for it from some external foreign manifestation instead of the reality of the wage push in this country? When I was Treasurer I had the Johnson thesis examined very closely and there was just no way in which that thesis could have explained our problems. I raise it only to demonstrate the length to which the Labor movement and the Labor Party politically have gone to disguise the issue. The current approach is to look at prices alone. How can Labor pretend to manage the economy properly when it continues to ignore and refuses to treat the root cause of our worst economic problem?

The only glimmering of an acknowledgment about the reality of wages and inflation was when the current Minister for Labour (Mr Clyde Cameron) at an executive meeting of the ALP last year in Adelaide planned a policy of freezing the wages of public servants as a means of halting inflation. He may, of course, have been motivated by his anti-public servant attitude which has been expressed continually in his unsubstantiated charges against public servants. One would have hoped that it was a glimmer of reality. But I regret to say thai within hours of it becoming known that he proposed this he received an avalanche of hostile telegrams from the trade union movement and other members of the Labor Party. With the flick of a finger his crusade was abandoned because of the power that he encountered and the end of economic realities was writ clear in Neon signs. Because of the trade union base and the Government's capitulation to it, we are left with the Government dualism. There is to be action on price maximums. There is to be no action on wage maximums.

Australians will not be fooled by a captive government supporting a free grab for the militants on wages while there is government or Labor control on prices. There have been experiments overseas on policies to control the serious inflation that has afflicted developed Western economies of the world. No other government has dreamed - not for a second has it passed through its consciousness - that it could have a one-sided policy, a prices policy, only. Whenever you hear of it, you hear of it as an incomes and prices policy and so of course it must be. I have made a number of statements on prices and incomes policies. I have publicly discussed the problems and the advantages of these policies. I examined the question of a prices-incomes policy for Australia quite seriously in an address to the South East Asia Treaty Organisation. I did not believe that our inflation was so intractable that these fairly extreme measures were required. (Extension of time granted.)

In fact, by our alternative approach to the adoption of prices and incomes policies, us a government last year, we broke the back of accelerating inflation and we were one of the first developed economies to achieve a significant reduction in the recent rash of international inflation while still maintaining real economic growth. In the 1971 calendar year inflation was at a rate of 7 per cent. In the 1972 calendar year we brought it down to 4.6 per cent. That was an achievement which was truly outstanding in the world scene. At the same time we were able to maintain real growth in constant price terms in excess of 3 per cent. We set the platform for an increasing rate of growth in the year 1973. The Labor Government has inherited an economy in very good shape for continued growth. I regret that I have no confidence in their maintaining the health of that economy. We need to consider our position very carefully today. We need to determine whether we are interested in a short term freeze with all its problems or whether we see a new and fundamental role for the States as a permanent feature. We would need to make decisions about enforcements. One thing is certain and that is that we cannot have a one-sided policy, and that is what the Labor Party is asking us to do.

I turn now more specifically to the question of the Committee. Our basic attitude is that we do not know how the Committee will possibly have an effect on the control of prices. We are concerned that its interference in relation to some areas of prices will cause- equity problems in relation to other areas. We do not know in what way recommendations of the Committee can exercise and influence price fixation and the market. It is a mechanism, according to the Treasurer, to assist in the regulation of prices and to try better to adjudicate the social equation as between prices and wages. But how is it to act? We do not know that. How is it to enforce its decisions? Apparently it will not directly enforce them but will do so indirectly by using the whole mechanism of the Government.


Mr Chipp - Blackmail.


Mr SNEDDEN - It is blackmail, says the honourable member for Hotham, and I cannot help but agree with him. It will be a committee which is capable of terrorising. It will be a committee capable of giving lopsided results. The Committee is destined by its terms of reference not to consider the whole mix of economic and social issues and it runs the risk of sanctifying rises. In itself prices justification is an indication of the incapacity of the Labor Government to look at the issue and to come up with the right answers.

Another point about this Committee is whether the Labor Party in government has forgotten about the separation of the powers of the legislature, the executive and the judiciary which is fundamental to our constitution. There is an attempt in the setting up of this Committee to make the legislature do the executive's job. There is no capacity for the legislature to do the executive's job. How can a committee of this Parliament have access to the necessary range of staff for research and the accumulation of information in order to make effective judgments? It will be done on a political basis, not on an objective basis. It is a frightful intrusion of executive action into the legislature.

As 1 have said, to impose inflation is rather like being in favour of mothering. The necessity is to identify its cause and operate against it. We are extremely sceptical about the merits of this Committee. However, we will join it. The Government has the numbers. We will join it and take our place on the Committee in order to ensure that more objectivity is brought to bear on the problem of price control than has hitherto been the case in the councils of the Labor Party. We feel that we ought to exercise our influence to ensure that an irresponsible approach is not adopted to those areas of the economy which will be under the scrutiny of the Committee. We will be watching to see that there is no prejudice, no intimidation and no false conclusions.

Inflation is the major economic problem. We have no fundamental objection to policies directed against inflation. Indeed if we were in government we would continue to take action against inflation, I would hope as successfully as we did last year. However, we reject policies towards prices alone because they are an empty sham and, as one newspaper suggested in relation to this Committee, it is an exercise in political relations - an attempt merely to show that the Government is doing something about prices'. If the Government is serious about inflation it will receive our wholehearted endorsement. It must acknowledge the causes of inflation and attempt to deal with them as real, total issues. The terms of the motion deal only with private sector prices. This is yet another closure of the eye to a specific area, because public sector costs have just as real an impact on personal expenditures and price structures. My colleague, the Deputy Leader of the Opposition (Mr Lynch) has already moved to amend the terms of reference to include the public sector. We will not oppose the motion. We-will sit on the Committee for the reasons I have given. We have no confidence that the Committee will serve any worthwhile purpose. But we will not let it terrorise, abuse or falsely use the power of government against the industrial sector of Australia, which is the sector which provides jobs and growth and is the hope for the continuing growth of the great Australian nation. We believe that the Government is both unable and unwilling to deal with the insidious evil of inflation. I believe that inflation will be this Government's Waterloo.







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