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Tuesday, 13 November 1973
Page: 3196

Mr MCMAHON (Lowe) - After listening intently to the Treasurer (Mr Crean) I have to confess that I come back to the conclusion that I had formed before I came into the House. What we are supposed to be debating in this debate, which was opened up so well and so effectively by the Deputy Leader of the Opposition (Mr Lynch), is the total incapacity of the Government to carry out the effective economic and financial management of this country. I go a stage further by saying that if honourable members believe what the Leader of the Government said yesterday that Parliament has enough power and what he has said before it is perfectly obvious that the Government does not need the powers for price and income controls that it intends to refer to the people by referenda during the course of the next few months. I have with me today a statement of his and I have another one made a few months ago from which I will quote. He said that the States have adequate powers. I add the words 'if only they had the guts and the will and the wish to implement those powers and to do so effectively'.

Mr Reynolds - Tell it to your friend Askin.

Mr McMAHON - Do keep quite. Go back and lecture in the schools. With great deference to you, Mr Deputy Speaker, I do wish that Mr Speaker himself was now in the chair because I want to use a word that I think would be more easily understood by him than by you. He is a man, as it were, bred and reared in the same locality as I was - Redfern - and will understand what I mean. The proof of the pudding of the Government's failure to implement its policies and to manage the economy effectively is that the economy is now in an awful bloody mess. There is no more eloquent or easier way of putting it than that, and I think I will be able to prove it in a few moments. When we have a look at the conditions that exist today how many people do we find who are disenchanted with the activities of the Labor Government and the solo efforts of the 27 members of the Cabinet, each moving off in different directions at the same time? Yesterday we had the eloquence of the Minister for Health (Dr Everingham) who disagreed with the Minister for Social Security (Mr Hayden). I believe he was rebuked - I hope he was not, because I would never rebuke a man as kind as he is - by the Prime Minister (Mr Whitlam) for his statements in which I think he believed, although he was probably wrong. But who thinks badly of a person who believes something sincerely and who states his opinion? A clear illustration of the attitude of the Treasurer can be gained from the fact that he wanted to incorporate in Hansard a history of interest rates. We are not interested in the history of interest rates unless there are lessons that can be learned and put into practice for the future. This shows what is in the minds of people - regrettably, the Minister for Social Security, who is at the table, is getting to that stage too - who are living in the past and who are determined to stay there, feet, heart, soul and everything else associated with them.

I come back to the substance of what I wanted to put to the House today. I said that the economy is in a mess. On this second occasion I leave out the great Australian adjective because of the sensitivity of your feelings, Sir. I put it to the House that it has been adequately proved by the consistent and well thought out policies that we had, largely as a result of the work done by my colleagues when we were in government, including the then Treasurer, and the then Minister for Labour and National Service, that we could achieve all the economic objectives that any country would want to achieve, and that we did even better. Strangely enough we have never been able to get across the message of our economic success to prove to the Australian people the degree of that success and what it meant to them. I think that in a few minutes I will be able to explain to you, Mr Deputy Speaker, exactly what is involved here. When we ceased to be the Government, according to the implicit price deflator inflation was running at an annual rate of 2.2 per cent in real terms. What other country could equal that record? Yet who says much about it, even on my own side? We had achieved a rate of growth in real terms of production in the non-farm sector of 8.5 per cent. If these are not good records I think all of us ought to go home and do something a little different.

I want to point out how this was done. How did we achieve it? We did it because we adopted a consistent group of policies. We did not accept one, as the Treasurer is doing at the moment, for reasons that are beyond his own capacity to control because he is only one in a Cabinet. Regrettably he is not one in the top lot who can ensure that his voice is listened to. I doubt whether it is heard very much and to the extent that it is heard people do not take very much notice of it.

Our policy was consistently to apply pressures at a selected number of areas and through that means be able to ensure that we achieved the objectives and the results that we did achieve. If it had been demand that was causing inflationary pressure we would achieve control of demand by budgetary or fiscal policy. If it was money supply we would take action in respect of the quantity of money, the velocity of circulation and interest rate policy. If it was, and at the time that we were in Government it was in fact, the predominant inflationary force of wages, we would intervene before the Conciliation and Arbitration Commission and advocate wage restraint. There are other policies, such as, for example, the policies relating to tariffs which have been proved ineffective in the Labor scheme of things because the international trade cycle is on the way up. When the Labor Party did act, it acted too late and under circumstances where it was obvious that its policies were inappropriate or ill timed and would not achieve their objective.

What the Treasurer has forgotten, and what the Labor Party has never known, is that timing is particularly important. Whenever the Labor Party has introduced a policy it has been either too soon or too late, or done in an unco-ordinated fashion. I turn back to mention one or two of the policies that I think have been dangerous and then come to the question of whether or not prices and incomes powers should be given to the Commonwealth Government.

Let me speak first of all of me money supply. We know very well that unless we get co-ordinated policies we cannot expect monetary and interest rate policies to be even remotely effective. But Labor abandoned the Budget as an instrument for the control of money supplies. The Treasurer said that he intended to wash it out of his hair. He washed it out of his mind and soul as well. Consequently the Budget increased expenditure by 29 per cent when on all the facts and figures, and in accordance with the pleading of the Treasury officials who ought to know a little better than the average member of the government, a rate of the order of 8 per cent would have been appropriate. Not only did this boost demand when there was no necessity to do so but also it had the effect of increasing the money supply. As the money supply increased through budgetary action it minimised the effect of other complementary action taken by the Government, such as the control of capital inflows and action taken in connection with the reduction of tariffs. So inevitably it happened that the Labor Party's policies were bound to fail. But with what effect?

Let me give a couple of illustrations. The first relates to interest rate policy. If we get into a position where shortages of supplies in the community develop, that is when demand is too high and supplies are too low, then no matter what economy-even in a communist economy - the price of goods and services in real terms will inevitably rise. In those circumstances interest rate policy itself largely becomes ineffective. As an illustration because the interest rates on housing authority loans have been driven to a relatively low level it will mean that money will not be attracted into the permanent building societies or into the savings banks. It will go where the reward will be greatest. Demand under present conditions will remain high and increasing. That has meant, as my colleague the Deputy Leader of the Opposition (Mr Lynch) has said, that a man who borrowed $14,000 for a home in June 1973 will now have to pay 24.3 per cent or $26.22 a month more. Now I come to the final matter to which I want to refer, and that is whether or not this has a bearing on the prices and incomes referendums-

Mr DEPUTY SPEAKER (Mr Scholes)Order!The right honourable gentleman's time has expired.

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