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Tuesday, 29 May 1973
Page: 2750

Mr EDWARDS (Berowra) - In speaking to the Supply and Appropriation Bills before the House it is appropriate, to offer some comment on the economic policies of the Government. We live in stirring times. I doubt that there has been a time for many years when there has been so great a degree of uncertainty, not to say alarm, among the Australian business community - in manufacturing, mining, agriculture and, indeed, tertiary industries as well. I have only to instance the building societies as well as the high feelings of lawyers and doctors. The wage and salary earners of the nation, and their families, who derive their livelihood from employment in the factories, the mines, the farms, the shops and the commercial enterprises of this nation will see and experience the effects of that alarm and uncertainty in their own way.

Not even the massive burgeoning bureaucracy and other changes threatened by recent legislation of the Government will change substantially the fact that this country is as of now, a predominantly free enterprise economy where the goods and services and the employment opportunities are provided by private firms and industries in accord with the circumstances and demands of the marketplace. Work, production and economic life are predominantly a partnership effort and not a struggle situation which is the dominant emphasis of honourable members opposite. A partnership is the only enduring view.

The first and most immediate reason for this uncertainty and alarm is the clear evidence that this Government, despite its protestations, is not really serious about inflation. This makes its professions of concern for social justice ring somewhat hollow. How can we square its attitude to inflation with the professed objective of a new deal for tfe* poor, the pensioner and the underprivileged?

By and large, the rich are well set to cope with, if not to gain from, inflation. It is the typical family and the poor who must struggle to keep up and fight the never-ending battle to stretch shrinking dollars to cover family needs. By and large, the poor are locked into safe Labor electorates and the pensioners are to be found in the so-called 'widow belts' in seats held mainly by members on this side of the House. So, in crude, short-thinking political terms, the Government may think that it can tolerate a spanking rate of inflation, but the fact is that it cannot. The community will not accept the adverse effects of a spanking rate of inflation - one might speak of super-inflation, but any rate of inflation in excess of, say, 3 per cent - that may sound exaggerated - is unacceptable in the long term, and we need to lose no opportunity to stress the fact. The community will not accept the adverse effects of super-inflation as they become increasingly manifest. The electorate will not accept them; it will reject them and it will reject the Government that is responsible for them.

The true attitude of the Government towards inflation comes out on two of me main fronts of a policy to contain inflation. The first is the necessity to contain demand, to keep aggregate demand adequate but taut, and the second is the sphere of contending directly with prices and costs - a so called prices and incomes policy. The Treasurer (Mr Crean) revealed the true disposition of the Government m relation to total demand, as I mentioned the other day, when he said in an address to the Company Directors Association of Australia in Melbourne on 13 April:

The Government rejects the concept of over-full employment as a major cause of inflation.

In this respect, fortunately for the country, those experts el wham the Treasurer recently said 'It is important to keep them on tap but not on top' have got on top of him in this matter. When he was introducing the Prices Justification Bill' recently, he stated that 'obviously' a necessary part of an anti-inflation strategy is 'to avoid the emergence of an overall excess demand*. But there can be, no doubt that mis Government will err on the side of excess demand rather than on the other side. The Government's own free spending since attaining office has been a major Sector contributing to the imminent reemergence of excess1 total demand in the economy.

In the prices and incomes field, the Prices Justification Tribunal is to be established, but nothing is to be done on the incomes side, and that means in effect the costs side. Everywhere else in the world where a serious prices and incomes policy is essayed the institutions of the policy typically are 2 bodies - a prices body and a wages body. In the United States of America there was set up the Prices Commission and the Pay Board. Similar bodies were set up recently in the United Kingdom. As I stressed in a recent speech in this House, the reasons for the 2 bodies are at once technical and operational and also socio-political. They are technical because the mechanism of inflation involves, in the broadest analysis, one causal chain from price increases to wage demand and wage increases - this is the area of which Government spokesmen frequently put great emphasis. I concede its importanceand another causal chain from wage increases and cost increases to price increases.

The essence of a prices and incomes policy is the attempt to restrain the response in each case - in the one case the response of wage demands to price increases which, amongst other factors, stimulate those wage demands; and in the other case of price increases in response to wage increases. So, the reasons for the twofold approach are, as I say, technical and also socio-political. Not only must there be an equally weighted prices and incomes control system but also it must be seen to be there if any progress is to be made towards achieving that community consensus without which the policy will never work. So as I said on that earlier occasion, the Opposition supports an institution in the prices area - though perhaps not this all-embracing and, as it stands, pretty unworkable and, to boot, toothless creature - I was going to say monster' - for which the Government's present legislation provides.

But what I do want to stress is that, on tha costs side of the equation, the Government not only is doing nothing but is positively reversing the course we have been on whereby the Full Bench of the Conciliation and Arbitration Commission could have become something in the nature of a pay board - a board of review of inflationary wage settlements. Thus, as I have said, in this sphere of prices and incomes policy the Government is not really serious about the control of .inflation. What this one-sided approach will involve, if it is effective at all, will be a squeeze on profits. That focuses the whole stance of the Government. We on this side of the House stand unashamedly for private initiative, self-help and free enterprise, though not untrammelled laissez-faire. The very structure of modern society with giant firms on the one hand and, on the other, big unions (and if the Government's legislation fostering union amalgamation goes through, there will be still bigger unions) and with neither side necessarily or primarily concerned with the public welfare - this very structure of modern society makes government oversight of the economy and government intervention in the economy in some measure essential. I need mention only one particular aspect, and that is that big industry and rapid economic growth impinging on a finite environment necessarily spells pollution in a big and accelerating way, in the absence of a vigorous government policy to combat it and so maintain and in some cases restore the environment and the quality of Australian life. But that having been said whereas this side of the House welcomes and fosters the endeavours of private enterprise as a partner with government in the development and prosperity of the nation, the stance of this Labor Government is clearly and unambiguously antibusiness. By and large, the Government chooses to spurn the leaders of industry and commerce and, perhaps I should say, also the larger group of the managers of large organisations and the proprietors of unincorporated businesses. It does not consult or inform where it should, but proceeds headlong in pursuit of its doctrinaire policies. I need refer again only to the ill-thought-out shape of the proposed Prices Justification Tribunal, the Government's penchant for unrealistically low interest rates and the problems that can cause, and the undisguised push towards the nationalisation of the oil and gas industry in this country.

The total effects of the Government's policies will converge, in the last analysis, on one thing - the rate of return to enterprise and capital. That may become the focus of the squeeze on business or on the private sector of the economy. It is true that right at this time production and business activity in the economy are expanding; so, by and large, Gales are not the problem. As I said, the cause for concern will be the rate of return. The profitability of business enterprise in many spheres is threatened by an array of measures, ill-conceived or not thought through at all and, above all, not explained to the people of this country. There is, as I have said, the pressure to be applied to keeping prices down, so far as it is effective, through the Prices Justification Tribunal machinery. There is the boost to wages and salaries from the open season to collective bargaining, which is the essential outcome of the Government's amendment creating a toothless Conciliation and Arbitration Act.

Thirdly there is the inevitable pressure for 4 weeks annual leave in industry at large stemming from the Government's legislation for 4 weeks leave in the Commonwealth Public Service. There is the Government's support for the 35-hour week, ostensibly only in the oil, power and vehicle industries, but in fact, since it cannot be quarantined there - and we would not have it quarantined there brought in over a reasonable period - in industry at large. It can be demonstrated that if output in a particular firm is to be maintained at anything like its current level the impact of the 35-hour week and an extra weeks leave in many industries will be to increase wage costs by some 22 per cent. As this works its way through all industries there will be an upward thrust to total costs of a similar order.

The fourth factor which will contribute to the squeeze is the view expressed in person by the Prime Minister (Mr Whitlam) that the Australian tariff structure is too high and needs to be brought down. This is a complex and increasingly difficult area, made more so by the international climate of fluctuating exchange rates. Decisions as to what areas of manufacturing industry the investor and the nation should foster and develop must be based on clear assessments as to the long term prospects not only for world prices for goods but also the relative values of national currencies. The issues will have to be looked at pretty broadly and in dose consultation with industry, for clearly concern as to the precise magnitude of ad valorem tariffs, on which debate has most frequently centred in the past, can be quickly swamped by exchange rate fluctuations of the order of the past 18 months.

That bringo me to the fifth factor, the appreciation - I should soy the excessive appreciation - of the Australian dollar with its deleterious effects on rural industries and manufactured exports. The anti-rural stance of the Government is a subject in itself.

Mr Duthie - There is no anti-rural stance and you know it

Mr EDWARDS - You do not think there is? I think the honourable member should have a look back through some recent Hansards, expecially the debate in this House last week. Further, there is the question mark over export incentives, renewed only grudgingly for another 12 months. And there is the withdrawal of the subsidies for mineral search and exploration and the threat to the mineral exploration and production industry from the whole thrust of the Government's policies towards nationalisation of that industry. Is there not therefore a real basis for the uncertainty, for the alarm, that pervades the Australian business community and indeed the whole community.

Yet the major and unrestrained thrust of Government policy is in the field of social welfare. Every one of the Government's initiatives in this area can only be applauded. Much of what has been done is progressive and in some cases has been overdue, but the Government needs, as I have said previously, to look closely at the total effect. It is a fine thing to become the pace-setter for the nation but if the pace is too hot not only can the situation in the private sector become intolerable but the very purposes of the Government can be frustrated. It is a great thing to create in the Commonwealth Public Service an elite but it may be important to ensure, for ez ample, that the 12 weeks maternity leave for the young woman graduate in the Public Service does not prejudice the very job of the low income woman factory worker in Redfern because of the inability of her employer to match this benefit, among other measures. Again provision for the adjustment of Commonwealth employees' pensions according to the cost of living is a most admirable proposal but how, or rather how quickly, can employers in the private sector match the benefit, the cost of which will be an increase in employer contributions to the private superannuation funds from something like 10 per cent of their wage and salary bill to the order of 30 per cent?

To come bade to the starting point of inflation, if inflation continues to accelerate as it has in the recent past, what of the proposal to raise the standard age pension to the order of 25 per cent of average earnings? The amounts of 81.50 each autumn and spring proposed es am -increase by the Government will not attain S&s objective with inflation at a growing rate. So, as 1 have said, the Government's objective can be frustrated. I say that there is an urgent need for the Government to think through its policies and explain them to the Australian people. If not, while inflation will intensify, with the uncertainty and alarm which now prevails there will be a loss of confidence and momentum in the private sector of the economy. The drive too quickly to redistribute the cake will pull down, . amidst increasing inflation, the very growth of the whole cake, which in the long run is the only effective way of achieving the Government's aspirations. The end outcome then is likely to be that most unhappy of conditions, stagflation, in perhaps a somewhat new form - the superinflation of prices accompanied and exacerbated by a slack not so much in total demand but in productive investment and aggregate supply, with everybody in for the 'quick buck' investment. I warn the Government that that is where the Australian economy is headed.

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