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Wednesday, 28 March 1973
Page: 794

Mr HURFORD (Adelaide) - The contribution of the Opposition to this debate sadly reminds me of the 1930s. Then the great economic problem in this country was the recession - the terrible period of unemployment. There was a body of theory formulated by John Maynard Keynes, which was completely ignored by the men who were in control at that time throughout the world. For a number of years the great economic problem in our community has been stagflation*. There is a body of theory which has been ignored and which continues to be ignored by people like the Leader of the Opposition (Mr Snedden), the Deputy Leader of the Opposition (Mr Lynch) and the honourable member for Curtin (Mr Garland), who have spoken in this debate. The Keynes economic philosophy in the area of economic policy, which was right for the 1930s, is not right today, lt rests on the dependence of monetary and fiscal or budgetary policies to reduce aggregate demand in order to stop inflation. At least the Opposition has agreed with the Government that inflation is a problem. That philosophy seeks to activate demand on other occasions in order to pull the economy out of a recessionary phase. Monetary policy operates on the availability of credit while fiscal policy operates firstly on disposable incomes - incomes which are left in people's pockets to spend - and, secondly, on the relative role of government expenditures.

These are the sorts of policies which have been used, as we know, by the Liberal Party and the Australian Country Party. They still claim that they are the only policies which should continue to be followed. We know what sort of results they brought. They brought about an unemployment level of over 2 per cent when following these philosophies, demand was suddenly cut to an enormous extent by budgetary and monetary policies. More recently, John Kenneth Galbraith and some others have contended that monetary policy has contributed to rather than modified postwar economic policies. The modern school of thought points out that monetary policy is not selective in its impact and causes market distortions and even social inequities. I mention in this context the effect of interest rates on housing, which is a social welfare area. The monetary authorities' role is reduced to very short term financial manipulations which ensure orderly securities markets and an adequate growth of money supply.

In listening to the Leader of the Opposition (Mr Snedden), the Deputy Leader of the Opposition (Mr Lynch) and the honourable member for Curtin (Mr Garland) one would think that the whole' theme of what we are doing in setting up this committee is window dressing. My thesis is that it is built on very sound economic theory. Galbraith who, as I mentioned, is the apostle of the more modern theory I referred to, argues that Budget policies are similarly non-selective - at least as they are practised by non-Labor governments - that they are capable of selection, but in the areas of resource allocation and the setting of appropriate social and welfare priorities these budgetary policies have been remiss. However, it is true that budgetary policies have more relevance to inflation control than do monetary policies. It would not be correct to say that Keynes's principles are being discarded for Galbraith's. At certain stages of the business cycle under certain conditions and in terms of community problems, the balance of payments situation and so on, one mixture might work better than another. The best that can be said at this stage is that Galbraith adds another tool to the kit of economic policy makers, a tool which the Opposition wants to deny us. The Opposition's own policies in the field of inflation have been completely bankrupt. Just because the Opposition did nothing while its members were in government, it now wants us to do nothing. The Opposition is not going so far as to oppose this measure but it is going so far as to sound like people at a wailing wall when it comes to talking about this measure.

Let us have a further look at Galbraith's policy. I add that what I am saying about the theory on which this proposition is built applies to the prices justification tribunal mainly, but this proposal to have a parliamentary committee is an integral part of the operations of the Government prices justification tribunal which will be set up later. Gal.braith's first point, which he made quite clear, is close to the hearts of all of us. He said that high employment is necessary for sustained economic growth since low output and idle capacity are a disincentive to investment. That point is close to the hearts of honourable members on this side of the House but we would not know whether it is close to the hearts of Opposition members because they were responsible, by their budgetary policies and by their being happy only with outworn economic attitudes, for the growth of unemployment to the shocking stage that we had it from this time last year until near the election. Galbraith said also that no policy of prices stabilisation has any chance of permanent success if it argues that there must be deliberately manufactured and continuing unemployment. 1 repeat that the opposite attitude to the one which the Government is putting before the nation in proposals such as our prices justification tribunal, backed up by the proposal of having a parliamentary committee, is to use the blunt weapons which were used by the previous Government and which created the unemployment which we had.

Professor Galbraith argues that in the United States and in Australia during times of high employment, prices are unstable - we have seen this - because of a defect in the economic machine, particularly in one sector. This sector is the one in which firms are very large and control by them over prices is substantial. There is opportunity for large discretionary increases in prices whenever demand is favourable. Is this not the situation in the steel industry where at the moment there is only one large producer - Broken Hill Pty Co. Ltd? Galbraith said that there is, furthermore, a powerful incentive to exploit this price discretion when wages are raised, particularly when we have a monopoly situation. So long as demand is at or near full employment limits, prices and wages will react on each other in a steady upward spiral in industries characterised by strong firms and strong unions. Inflation has been characterised by increases, particularly in the prices of steel, steel products, machinery, cars, paper, rubber and so on in this country. Budgetary and monetary policies of the kind used by the previous Government as part of its bankrupt policies do not deal with these problems of inflation appropriately because their impact is too general; they attempt to reduce aggregate demand and depend on a reduction of employment levels to achieve an easing of aggregate demand. Consequently, they are quite unacceptable to honourable members on this side of the House. Although inflationary tendencies tend to find their outlet in concentrated industries, the solution does not lie in breaking up such industries, such as was the policy of the previous Government by creating unemployment, because of structural and political problems that such actions do raise.

So the one course of action is for some form of public intervention in that part of the economy where full employment or an approach to full employment means inflationary price and wage increases. This is what we intend the prices justification tribunal to do, to intervene in those areas. We want the parliamentary select committee to act as a clearing house from the community to feed material to the prices justification tribunal. Among the principles governing this intervention is that it should be limited to the concentrated sector; the machinery for intervention should be simple and its aims should be restraint, not rigid price and wage fixation; and the effort to achieve stability should, if at all possible, be carried out in a conciliatory spirit. I have said most of this on previous occasions in debates on the Budget. It is a great delight for me - as on previous occasions when I was in opposition - to put forward this theory and to point out to the House these well developed theories of an economist of the great stature of John Kenneth Galbraith. It is a great delight to me to be in the House today talking in this debate when the Government is making its first moves to carry into effect this body of theory by setting up this parliamentary committee.

I remind honourable members of what I said earlier. The sad fact is that in the 1930s there was a body of theory to overcome the great recession that was taking place at that time. That theory was not used. We now have a body of theory to attack stagflation. For years we have had this body of theory but we have not had the men to bring it to fruition. We now have the men to do so and it is a great delight to be speaking in this debate and supporting that theory. This theory does not presuppose that the starting point gives a fair breakdown between labour and capital of the rewards of their enterprise. The whole of the Galbraithian theory rests on a partnership between labour, industry and government in these concentrated sectors particularly promoted by government. So whereas we heard the Opposition ranting about wages being the only reason for inflation in our community-

Mr Giles - That is not so. That is incorrect.

Mr HURFORD - I invite the honourable member for Angas to go back over the speeches of the Deputy Leader of the Opposition (Mr Lynch) and the Leader of the Opposition (Mr Snedden) and to look in a cold, objective way, which I am sure he is sometimes capable of doing, at what they said. They have not brought to this House any alternative method of attacking what we know to be the great ill in our community economically, namely, inflation. Both of them mentioned wages as being the great cause of inflation. They were completely bankrupt of any way of attacking the problem of inflation other than to confront the unions. I repeat that the theory is there to back up our prices justification tribunal, but it is our contention that a committee of the Parliament of this kind is essential. I am glad to find that even though the Opposition is moving amendments to the proposition at least members of the Opposition will serve on the Committee. We think it is essential as the clearing house in the community. A lot of the information which comes from the community will not necessarily go to the prices justification tribunal. In order to get greater efficiency and to stimulate productivity there are other areas where the information could go. It might go to a monopolies commission, a restrictive trade practices tribunal or the protection commission, as 1 believe the Tariff Board will shortly be called. It is Important that we should have the link of the Parliament between the people and these commissions and tribunals of the Government.

A lot of people are talking very good sense about participatory democracy. Here is a means of bringing that about. It is not only for that reason that I support the setting up of this parliamentary committee. There is. and here I agree with the Leader of the Opposition, a great deal of ignorance in the community as to the cause of inflation. Why should this Committee not use the information coming to it through these reports to educate the community about the nature of inflation? Of course it should, and of course it will. I draw to the attention of the House that what I have had to say as being the opinion of the Opposition relates to the Leader of the Opposition and of the Deputy Leader of the Opposition, from whom we have heard, but I suggest that it is a very marked omission in this debate that we have not heard from the honourable member for Berowra (Mr Edwards), a former university professor of economics. It is sad that we have not heard from him or from anybody in the Country Party.

Mr King - Wait until the debate has finished.

Mr HURFORD - I looked at the list of speakers, and I saw that no member of the Country Party was listed to speak. I will welcome it if we hear from the Country Party. I will welcome it if the Country Party supports us in attacking prices rather than just following the leaders of the Liberal Party, who are mouthing the attitudes of the businessmen whom they represent.

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