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Tuesday, 29 May 1973
Page: 2762

Mr SNEDDEN (Bruce) (Leader of the Opposition) - World wide economic management over the last 2 years has had its difficulties. In Australia, stimulus applied throughout 1972 and especially in the Budget last year provided the momentum for the economy to recover from its slack period. It currently is performing very well. This is an achievement of the last Government, not of this Government. Production, employment, incomes and spending are rising strongly in aggregate, and most sectors are participating in the rise. Gross domestic product is expected to be about 12 per cent higher in current prices in this financial year and about 4.9 per cent higher in terms of constant prices. This is a faster rate of growth than the 3.2 per cent (constant prices) that was achieved in 1971-72 and about in line with the average of 5.1 per cent (constant prices) rate of growth over the previous decade. Manufacturing output is rising strongly across the board. The building industry is extremely busy, the retailers are enjoying better sales than ever and farm income is likely to rise again in the next financial year after experiencing quite a dramatic lift of around 80 per cent in the current financial year.

These are the normal symptoms of an economy in the upswing of the business cycle - an upswing set in train by the expansionary fiscal and monetary policies of the previous Government and aided by the soaring export prices which world wide economic revival has generated. Even so, the economy is not free of some major trouble spots. Large sectors of the mining industry have been hard hit by currency revaluations, by Government hostility to overseas investment, by the removal of exploration incentives and the burden of the 25 per cent deposit requirement on borrowed funds. As a result, what was once the leading growth point in the economy is now languishing, profitless, in a sea of uncertainty.

Capital investment still shows no sign of revival. There is a danger that the uncertainties which Government policies and attitudes have created about the future profitability of Australian industry will seriously delay decisions to expand, limiting growth and future employment opportunities. That is something to be measured in the future. The steel industry, which has been subjected to a massive fiscal squeeze, has already deferred the expansion plans needed to keep Australian capacity growing in line with local industrial needs. As the spending boom develops, great pressure will be put on production capacity, of which danger signs have already been flashed.

Inflation is the implacable enemy within the economy. That is the enemy we need to fight and whatever we may think about current improvements, we can only be unhappy about the prospect of growing inflation. Most developed economies at present face the same problem. Most countries have responded with varying measures and with varying success. It is no comfort to the social victim of inflation to be told that his problem is shared by many other people in many other countries of the world. His discomfort is worsened by signs that inflation is accelerating to double figures in Australia. His hope is dashed because the Government has some extraordinarily naive and one-sided ideas about what needs to be done to contain inflation.

At a time when the Prime Minister (Mr Whitlam) is speaking about giving leads to the world, there is one lead that I am sure the world will not follow and that is his idea that inflation is contained by controlling prices alone. It is a unique approach that no other country has. All other countries realise that it is a two-pronged income-prices policy which must be pursued.

The Government has stated one of its objectives to be a better deal for the economically disadvantaged. Who suffers most from inflation? The answer is the economically disadvantaged. Labor promises a greater sense of national entity and purpose - how can you have national entity and purpose if all that you are doing is eroded by the effects of inflation? Labor promises a social and economic environment that is fair and progressive. How can it be fair when there is uncertainty? How can ii be progressive when nobody knows what the future holds? Labor promised all these things. It declared that it would have a coherent economic strategy to be worked out with the full participation of business. 1 will very briefly list some of Labor's more notorious performances. Since December 1972 the Labor Government has revalued our currency 19 per cent against the United States dollar. The Labor Government argued for a national wage increase of $11.50. Fortunately the Conciliation and Arbitration Commission rebuffed the Government's arguments and rejected them. The

Labor Government has set up machinery for prices justification without any attempt to deal with incomes. It is a ridiculously bad plan even for its intended purpose. Indeed, the legislation was so bad that there was no possibility of producing amendments which would make it workable in any real sense.

The Labor Government proposes to abolish sanctions against unions in the industrial system and to erode the authority of the Arbitration Commission to settle strikes and to protect the public interest. Cost-push inflation would be encouraged by the adoption of collective bargaining based -on union strength rather than on the merits of a case. The Labor Government is committed to major government spending by the creation of a number of new departments such as the Department of Urban and Regional Development. There will be excessive government spending as the impact emerges in the next Budget which the Federal Treasurer, licking his lips, has said would be a good Budget. Good for whom? Good for Labor's political cause but not good for the national interest It is just a political Budget we have been promised, not an economic management Budget.

The Labor Government has stated that it will act as the pacesetter through Public Service wages and conditions and will use its activity in this area as a lever to force the private sector of the economy to gear up wages and conditions. Realists will see it as a direct appeal for the votes of public servants. The Labor Government has recklessly attacked the permanent building societies for the interest rates they pay to people who invest their savings in those societies, and then the Commonwealth itself, at the same time as it is denouncing the societies' rates, has raised its own long term bond rate from 6 per cent to 6i per cent with a consequential increase at the shorter end. Anybody who looks at the money market now must be wondering bow on earth the Treasurer will fill the next Commonwealth loan without further raising interest rates. The Treasurer is a member of a party which constantly argues for cheap interest rates, but while so arguing it increases the interest rates.

The Government has frightened off foreign investment in all sectors and specifically has withdrawn taxation concessions on mining and oil exploration. It fails to understand the difference between the specu- lative and the genuine investment in the mining sector. The Minister for Minerals and Energy (Mr Connor) certainly has plenty of energy in his condemnation, even though we might be left with all the minerals in the ground. What a magnificent monument to him it will be as Minister for Minerals and Energy, with all the energy in condemnation and all the minerals in the ground!

The Labor Government has foreshadowed all kinds of taxation reforms with an obsession to get at the rich. The only problem is that according to the Labor Party you are rich if you have a taxable income of $100 a week. I have never understood that $100 a week would make a person qualify to be described as rich. That is what the Labor Party believes. Unfortunately, it is in government and can make its attitudes real by legislation. Family and other tax deductions are to be removed. They have some explanation for it, illogical though it is. Their proposal is that people with families - people paying out for hospital and medical expenses and insurance for the future - are to lose those deductions.

There are a great many middle income earners, single people and wage earners, whose children are self supporting and who will be sacrificed in the name of 'the welfare state'. We all want to provide proper, progressive and adventurous social welfare policies, but we do not want to make Australia a social welfare state in its worst form - as England faced. It brought England to its knees under a Labor government. As an example of future taxation measures I mention the proposed national health insurance scheme which provides for direct taxation at the rate of 1.35 per cent of a person's total income, not taxable income.

Mr Street - That is just a start.

Mr SNEDDEN - I am reminded that it is just a start. It started off way below 1.35 per cent. It has now been lifted to 1.35 per cent. The Government has said that there will be a ceiling of $150 on each person, but it is each person in a family.

Mr Wilson -That is only for the first period.

Mr SNEDDEN - I am reminded by my colleague the honourable member for Sturt that it is only for the first period.

Mr Fox - And no tax deduction.

Mr SNEDDEN - Again I am reminded, this time by the honourable member for

Henty, that there is no tax deduction. In other words, we are to understand that this great Utopia is not really a Utopia. It is a Pandora's box. Once you lift the lid you have no idea of what will jump out. It is certainly clear that the percentage of 1.35 and the limit of $150 are only the opening bid. This method easily lends itself to being jacked up again for the welfare state.

The Treasury states in its latest bulletin that production and employment are continuing to grow strongly. There is now full employment but inflationary pressures are evident, as are both demand-pull and cost-push pressures. It is hardly a legitimate means of dampening down demand-pull inflation to make irresponsible statements on private lending in housing, as the Treasurer is constantly making. We will feel the effects of his statements in 3 or 4 months time when I believe there will be a downturn in the rate of increase in housing approvals. At what cost is the price to be paid for a Treasurer who says he is on top, not on tap? He might finish up in the tip, along with his policies. At present the economy is running in a truly mixed fashion. It is mixed in the sense that it contains major elements of Liberal Party initiative and certain elements of Labor Party interference.

Mr Bryant - That is mystical.

Mr SNEDDEN - The Government has a spate of ad hoc unco-ordinated legislation. The Minister for Aboriginal Affairs, who has just interjected, is a great ad hoc-er. He is the most unco-ordinated Minister of the bunch. The Government has foreshadowed legislation through such ministerial verbosity that much of the Australian business community is suffering from future shock. Like Alvin Toffer's victims of future shock the people in the business community are unable in an environment that is unfamiliar, rapidly changing and unpredictable, to make a reasonably correct assessment on which rational behaviour and sound judgment depend.

What could have been a sensible attempt to balance, economic growth against other objectives has become a narrow prejudice against immigration which threatens to slow our rate of development, limit our room for economic manoeuvre and dry up opportunities for all Australians. Restriction of immigration, in spite of the rationalisations of the Minister for Immigration (Mr Grassby), is occurring. It is important that Australia be allowed to grow and not be subject to zero growth-zero population pessimism. Labor supporters are so pessimistic that they do not even believe in Australia.

The lack of understanding of economic matters of the Prime Minister, his obvious difficulties in keeping individual Ministers to a coherent plan, and a Treasurer who is increasingly fumbling compound the Government's difficulties. Instead of facing them and solving them, the Government turns to the old recipe of increasing centralisation and bureaucratic control of economic decision making.

As the share market has already signalled by carving 16 per cent off the value of all listed shares since January 1973, the Government has produced a recipe for stagnation rather than for the prosperity and growth to which we have become accustomed. This condition is the result of the shocks of the Government's decision to revalue and interest rates which are beginning to rise; but most important is the psychological factor of having a Government which in no way can be conceived of as an ally of anybody who invests his savings in anything. There are alternative economic concepts which need to be considered and from which the blueprint for Australia's growth and prosperity may be derived) The need for a prices and incomes policy has gained increased currency throughout the world as countries wrestle with the problem of creeping inflation. The Australian Government wishes it would go away but I am afraid that the wish will not be the author of the fact.

We are faced with a situation where wage claims are more than is available from the national income without debasing the currency. This is a problem that traditional fiscal and monetary measures, such as higher taxes and higher interest rates, have great difficulty coping with. They may be sufficient to control demand-push inflation but these traditional weapons have looked like a suicide sword in the face of a combination of wage-cost push with demand-pull that seems to be threatening Australia today. In both the United Kingdom and the United States of America attempts at voluntary incomes policies have not met with much success. The wages-price compulsory freeze, instituted by President Nixon in August 1971 and followed by the second stage in which wages and prices were pegged to 5 per cent and 2i percent respectively, did meet with success, though that success has now waned. This suggests that coercion sanctions are a necessary ingredient in designing incomesprices policies as a circuit breaker and regulator if neglect of policy over a period allows inflation to reach an advanced stage. That is the prospect for Australia at present.

A recent report of the Organisation for Economic Co-operation and Development stresses that an incomes-prices policy must be integrated into the social structure of the country so that government, employer and employee work in a co-operative manner. The traditional socialist class-difference talk does not achieve co-operation. It puts the parties into separate camps and just worsens the situation. Certainly the Government should not be egging on one side against the other. This kind of policy only undermines the peace and social structure of the country. A sense of certainty is vital to a country's economy. If economic encouragement is to be given in the form of investment allowances, export incentives and tax concessions or bounties, business leaders need to know whether they will continue. How else can rational decisions be made on investment, market developments and competitive prices decisions that run into the future? There must be a degree of economic planning to determine which sectors of the economy need assistance to provide overseas trade earnings. Within the country there must be a rational use of incentives to stimulate projects serving the national interest. The case of selective decentralisation is a ready example. In any economy it is important that the taxation system be equitable as well as providing revenue for government spending.

We do not need, nor should we face, the uncertainty to which I have referred. We do need positive, comprehensive plans to deal with inflation. We should have a determined policy. The Government should establish the order of priority for its proposals, say what is the cost of each proposal and when it will be implemented so that the public can be informed and give co-operation. The Government should establish a program to halt price rises and excess wage increases and state the guidelines which it adopts as the acceptable level of increases in wages and prices. The Government should give leadership to the people of Australia to be an achieving country. It should acknowledge that progress does not fall by chance from heaven. National rewards are earned by work and effort and meeting competition from other countries. The Government must recognise that a shorter working week coupled with increasing costs of materials and labour and recurrent strikes will cripple us and remove our capacity to improve health, education and social welfare standards in Australia.

The Government must face up to and establish responsible attitudes to public finance, public expenditure and government wage rates and conditions. It must not be the pace setter. The example it gives will run right through State and local governments and the business community. The Government has a clear duty to control inflation. In 1971 inflation was running at 7 per cent. We brought it down to 4.6 per cent in 1972. Now it is at an annual rate of 8 per cent and we are faced with a double figure rate by the end of the year. It is really important that Australia prospers, not that an idelogy triumphs without regard to economic realities.

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