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Tuesday, 29 May 1973
Page: 2760

Mr WHAN (Eden) (Monaro) - We are speaking today to the Appropriation Bills and the Supply Bills dealing with the supply of money to allow government to function. I will take the traditional approach and cover various aspects of the Australian economy. In particular, I will dwell for a moment on the son of approach that is taken by many specialist economists to the problems of this economy. I draw the attention of the House to an article which appeared in the 'Australian Financial Review' on Friday, 25 May. The article was headed Tribunal Draws Economists Scorn'. It was a front page article. It reviewed the proceedings of a coreference in Adelaide on the. Pries Justification Tribunal. It crystallised the cart of criticism we have, heard today, Sam tag honourable member for Berowra (Mr Edwards), which is narrowly based and deals with a very small section of the total economy.

Specialists in their field tend to suffer from the problem of referring to their own particular specialist interests. I recall, when I was a specialist on wool physics, sitting in the union building of the University of Leeds and wondering why I could not talk to the attractive girls around the union building, until one told me that she was not in the least interested in the plasticity of wool which at that stage was my only interest and my only topic of discussion. It brought home to me a lesson which obviously was not understood by the economists at the Adelaide conference, because each of them established his base for attacking the Prices Justification Tribunal in his particular specialist area. For example, the Prices Justification Tribunal and the problem of inflation overall were characterised by one of the economists as a confrontation over wage claims on the one hand and the need to justify profit rises on the other. To me, that is far too narrow an interpretation of the problem. This will be one of the aspects dealt with the Prices Justification Tribunal in its work.

Another economist defined the causes of the current inflationary pressures in 3 ways - excessive government spending; an inordinate rise in the money supply, which he was good enough to attribute to the previous Government; and the rise in import prices, which is an importation of inflation into Australia. His prescription was a cutting back on public expenditure. I submit to the House that it is time we examined the priorities which lead to this prescription. The election campaign was fought on social issues. The questions df education, health and other welfare problems were clearly defined in the. last election campaign as a major area for government expenditure. Five months after the Government was elected we find economists resorting to the solution of cutting back on public expenditure at a time when this Government is meeting problems and issues which cere clearly put before it as the major issues at the last election campaign. What priorities does this economist hold when he is prepared to cut back on the very issues on which this Government was put into power? It is clear that we need to look at other areas of private and public expenditure in or#r to curb t&o presures that exist in the present . economy.

To simplify the recommendations by looking at the easiest area of restraint is, in my view, to miss the point.

Another economist, possibly correctly, claimed that business is not taking excessive profits and that the Prices Justification Tribunal will only reveal this fact. If it does, that is fine; but at least the public needs to have this fact brought before its attention. An agricultural economist who was not named in the article dismissed the Prices Justification Tribunal and the concept as a whole as not worth consideration. The point to be made here is that none of these economists, in fact no economist throughout the world, has presented the solution to the problem of inflation. Without the answers, they are prepared to criticise, and to criticise, as I have illustrated, from the point of view of their own narrow experience in their own specialisation. The basic paper which was the subject for discussion on this occasion correctly called for a cost-benefit analysis of most projects and most areas of government expenditure. I fully subscribe to that view. However, I add that social consideration must be included in such a cost-benefit analysis. It is no good using economic parameters alone as justification for expenditure. We must build into these economic parameters other considerations relating to the social impact of this expenditure. Under those terms I would support the approach of the basic paper at this conference, namely, that cost-benefit analysis should be brought to bear.

Another economist dismissed the idea of prices justification on the ground that the only areas in which it would be effective were those in which monopoly pricing existed in the economy. The basis of his dismissal was the idea that there was a large number of monopolies in the economy and therefore the Prices Justification Tribunal would require an inordinate number of staff. Almost certainly this will be one area of pricing revealed by this type of investigation, but again I suggest that it is only one of a number of factors that will be revealed by this process. The point that seems to have been missed by the critics of this process is that once again we have no lead from any other part of the world on the approach to controlling inflation. The whole rationale of this approach is that we need to look at individual pricing mechanisms to obtain a better understanding of the things which cause prices to escalate. Firstly, it may be wage claims. Secondly, it may be monopoly pricing. Thirdly - I suspect that this will emerge as a very strong factor - it may be the failure to increase productivity in various areas. We can see from various price rises that wage claims alone are. not enough to explain rapid increases. The prime example is the rise in meat prices, which is attracting most attention at the moment. No one with even a superficial knowledge of this pricing mechanism could attribute that price rise to wage claims. There are many price increases that are due to increases in taxation or the cost of government services. These are more directly in the control of the Government than are some of the other measures we can use to control the economy. I put my finger particularly on the question of productivity because it is a complex area which involves the willingness of manufacturers to accept technological change and, in some cases, provide a competitive area where, their own technology and capital investment will be challenged by other people with new ideas.

The Australian Industries Development Association in making the case against such things as the Prices Justification Tribunal in its bulletin No. 242 of June 1973 has a very interesting graph on the front page which shows that productivity in Australia has remained fairly constant over the last 2r years. I believe we need to ask the reasons why productivity rises have not been spectacular in this country. One can look at the expenditure on research and development in Australia by Australian industry and find that it falls far short of expenditure by similar organisations overseas. We could find many areas in Australian industry where traditional practice has stood as a barrier to the introduction of new ideas, partly because, as I suggested before, the existing industry has invested large volumes of capital in the traditional processes and they do not wish to see this capital jeopardised by the introduction of new technology. The Prices Justification Tribunal and the associated parliamentary Joint Committee on Prices will in fact reveal some of these areas of price pressures in Australia. Because it is a new area and because it is an experience that no other country has gained, we can expect in the first instance to be educated. We can expect that these 2 groups will point more specifically to the pressures that give rise to price increases in our economy.

It is far too simple to define the problem as most of the economists have done and, indeed, as most members of the Opposition have done in their speeches in terms of one. or two factors that are responsible for price increases in the economy. It is quite clearly a complicated matter which requires the careful scrutiny and examination that these 2 bodies - the Prices Justification Tribunal and the parliamentary Joint Committee on Prices - will give. I submit that we are now on the threshold of an interesting experience in relation to the management of the economy. Firstly, this Government has accepted the clear mandate from the electorate to give some of the wealth of the country to the underprivileged members of our community. It has also accepted the clear mandate to divert some of this investment into educational resources. These are issues which we have a mandate to carry out and it is whistling in the wind to suggest that a reduction of expenditure in this area is a solution to our current problems.

It is clear also that this Government needs to develop retraining programs to give labour much greater flexibility than it has had in the past. This is a prerequisite for us being able to allocate our resources more effectively throughout the community. Many of the subsidies and tariffs that we have now in the economy which act as a barrier to the redistribution of resources are not there to produce the. particular commodity but are there quite correctly to protect the welfare of people whose incomes depend on those industries. If those people can be transferred from one industry to another through effective retraining programs, the need for tariffs and subsidies will be reduced significantly. Clearly we need to establish a much more rational and sensible social basis for our community if we are to have a rational, sensible economy. If we continue, as was the practice over the last 23 years, to concentrate on the whole issue as a conflict situation in which it is labour versus capital and in which any 2 groups which can be made to fight are spurred on to fight, then, of course, progress will be frustrated as it has been. These 2 bodies - the Prices Justification Tribunal and the parliamentary Joint Committee - represent a new adventure in opening up our knowledge of the avenues and pressures which cause dislocation in our economy. I commend these Bills to the House.

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