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Wednesday, 5 December 1973
Page: 4318

Mr EDWARDS (Berowra) - I do not propose to detain the House for long. I have previously expressed the view in relation to the 25 per cent tariff cut that is being validated by this Bill, that it is not the sort of treatment that this side of the House would have meted out to industry. 'In saying that, I want to underline 2 points. The Leader of the

Australian Country Party, Mr Anthony, has already done so to some extent, so I will not be repetitious. But I do stress that while it was a cardinal principle of policy of the previous Government - of the Liberal Party and of the Country Party - that adequate protection should be afforded to economic and efficient industry, the previous Government did not rest content with existing levels of the tariff. It did institute the so-called systematic review of the tariff, which is continuing, beginning with those areas where protection was the highest and had not been reviewed for many years. The report that we have had on the electronics industry, including specifically the problems associated with the introduction of colour television, was in accordance with that review.

I think it was in April 1972 that the previous Government instituted the so-called 1,000 items margins' reference. The principal purpose of that inquiry was to provide information for trade negotiations, but it was also to serve as a major indicator of areas of excess protection. The membership of the Tariff Board was enlarged by the previous Government to expedite those inquiries. There can be no doubt that the end point would have been recommendations for reduced tariff rates in many cases on a properly selective basis and after open public inquiry. That was the manner and the policies of the preceding Government.

In contrast we have in this action of a 25 per cent across-the-board cut in tariffs, a measure properly of a long-term character, but introduced in the context of the shortterm management of the economy. In my view, it did not attack directly any of the major causes of the inflationary problem with which the country was faced. It did not attack Government spending directly. When I mention Government spending I usually get a reaction from the other side of the House asking whether the cutting of Government spending is the only sort of approach that I can suggest should be taken. Sometimes that is the only action that can be taken in a situation in which private spending is in a resurgent condition.

Dr Cairns - We want you to be specific and to tell us where you would cut it?

Mr EDWARDS - The Minister for Overseas Trade interjects. He wants me to tell him where Government spending can be cut. Look, Mr Minister, the answer to that question is that we must look at the overall condition of the economy. There were many responsible commentators at the time of the introduction of the Budget, commentators sympathetic to the Government's side of politics, who said that the sort of increase possible within all the circumstances for Government spending is perhaps 15 per cent - at the outside an increase of 17 per cent. That indeed would have been the sort of judgment one might have come to. The procedure then is that you come up with the sorts of proposals which amounted within Australia to an increase of 20 per cent. You then look at the effect of a cutback to 17 per cent. If there were particular items where such a cutback would be crucial, they would presumably get some priority. Other areas would be reduced.

This is the sort of choice that we are making all the time. This is the sort of choice the Minister undoubtedly had to make to keep expenditure increases to 20 per cent. I would suspect that the Government's aspirations would have exceeded even 20 per cent as, indeed, would perhaps mine. But in the circumstances in which members of the Government found themselves, the responsible course of action as enjoined upon the Government - I repeat by commentators many of whom were sympathetic to the Government - was to contain total spending to that sort of level. If, in fact, even so, the Government wished to go beyond that level a possible procedure - with which I have not a great deal of sympathy because of its deleterious effects on wage claims and productive effort - would have been an increase in taxation beyond those increases that the Government in fact did implement. It implemented plenty of those. For that action, the Government has had advice given to it by people I am sure it will regard as sympathetic to its cause, Dr Coombs and the Federal President of the Australian Labor Party, Mr Hawke, I believe, and, in an earlier speech which I could easily turn up, by the Minister for Social Security, the honourable member for Oxley (Mr Hayden). That would have been the responsible course of action.

But that, I repeat, is by way of digression. The tariff cut has no effect in that area. It could have been predicted that it would not have a short-run effect on the problem of excess demand because as my colleague, the Leader of the Country Party, said, the position of world supply was such that no surge of imports in response to it could be anticipated. It could have a marginal effect only on the cost-price spiral which was beginning to take over at that time as a predominant cause of inflation. I could add that it could have only only a marginal effect on the problem of imported inflation. At no stage have I suggested that our current inflationary problems do not have a considerable element of imported inflation. But a good deal of that imported inflation is by way of so-called 'exportables', and there specific action could have been taken. The Government set up a committee. It eventually came in with a report as to what might have been done about meat prices in particular. Something could have been done about meat prices in particular but not, in my opinion, along the lines laid down in that report in which there are, in my views, major errors which invalidate it. But this action could have been taken earlier on and would have been a good thing. So, on any of these points on the matter of Government expenditure which is one thing under the Government's control, and on its impact on the imported inflation the tariff cut could have only a very minor effect via the cost of imported goods. And, in terms of its impact on the wage-cost spiral, the short term impact was very limited.

I say, therefore, that to the extent that the decision did involve courage - I have suggested previously that perhaps the suggestion that it did has been overrated in the circumstances in which ft was clear that the anticipated boost to imports could not take place for some time - I can only express a hope as to the longer term potential benefits of this sort of change, in terms of forcing some reallocation of resources and in eliminating the so-called water' in the tariff which should have some ultimate effect on the cost-price spiral. But that is something which could have been considered directly - the Government had the report on the 1,000-item inquiry. I believe in fact that was considered in this Report - Ways of Increasing Imports which was brought down for the consideration of the Government.

I express the hope that these potential longer-term benefits may outweigh the other long-term and overriding, in my view, disadvantage of this move, that is the potentially harmful and damaging effect on business confidence. It is that long-term planning by industry on which the thrust of continued sound economic growth depends and, therefore, on which many of the social and economic aspirations of the Government also depend. It is, as the Leader of the Country Party pointed out, superimposed on a very considerable revaluation of the Australian currency. I take this opportunity to repeat what I have said on several occasions, that for my own part a revaluation of the Australian currency was indeed inevitable. I have commented, on the timing and magnitude of that revaluation. I noticed in a report of calculations by the National Westminster Bank, which provides a service that is reproduced regularly in the Economist' of the movement in currencies of most countries since Smithsonian, which was December 1971, that we are at the top of the league in terms of up-valuation. In fact, we are way up now above the Japanese yen and even above the Deutsch mark.

I think one must consider taking a longer view of whether this kind of policy is appropriate, because in the longer term the effect is to make more difficult the achieving of manufactured exports, which in the long run is the big growth area for exports, and on its effect on the stimulus to imports. It is feasible that, without the explicit consideration of these exchange rate matters, we could in this way revalue, so to speak, out of existence the potential surplus or even balance on current account that we have achieved. This is a point I would have thought would be somewhat dear to the Minister's heart also, namely, that a situation of potential surplus or even balance on current account is the basis for playing a responsible role in world economic development

We are a wealthy country. To revert to the kind of situation that prevailed in the 1960s, when we were a large net importer of overseas capital, is hardly one consistent in my view with our role as a rich nation in a capital-hungry world. So, to proceed in this way to permit a revaluation, the effect of which as things begin to turn around will be to revert to the deficit situation on current account that was characteristic of the 1960s, seems to me to be a policy both unwise in the interests of Australian industry and irresponsible in terms of our obligations as a rich nation in a world in which many countries are in a developing phase and in need of assistance.

The only other matter in the Bill on which I will comment is the Report on Consumer Electronic Goods and Components, a report with which it is almost impossible to deal in any detail. The Tariff Board is to be congratulated on such an insightful and wide-ranging report. No doubt my colleague the honourable member for Wakefield (Mr Kelly) will endorse my view. Yet, for my own part I confess to some unease, which evidently is shared to some extent by the Government. So far as I am aware, of all the decisions we are validating today, this one represents the only case in which there has been a significant departure from the Board's recommendations. To say that the report is accepted - I think the phrase was 'the thrust of the Board's report was accepted', and perhaps we can agree with that - is one thing, but the precise recommendations that there should be a 25 per cent tariff on components and a 30 per cent tariff on finished products were not.

What we have is a decision that there should be a 35 per cent tariff on components and on the finished products. On the face of it, and taking those figures in the formula for effective protection, it really does not change the protection afforded the assemblers at all, but leaves much to depend on the Government's actions regarding what it has said it proposes in respect of subsidisation. In this technological age the importance of a viable electronics industry to the future of Australia is strongly supported by the Opposition Parties. Still unresolved, as we have yet to have the second instalment, so to speak, of this inquiry, is the major question of how far the viability of the industry, including the capacity to maintain a nationally independent program of research and development, is dependent on an integrated operation combining a thriving consumer product division together with production for the professional market.

I suggest that the Government has taken the view in its decision for a 35 per cent protection that the consumer products section of the industry must be afforded reasonable assistance - although less than the industry would regard as adequate. A great deal will depend on what the industry can achieve by way of rationalisation and restructuring of its operations in response to the Government's proposed subsidies for components. The problem of potential unemployment in this industry was raised during question time this morning by the honourable member for Melbourne (Mr Innes), if I remember correctly. The Tariff Board's report refers to unemployment or a change in employment in this one section of the industry of about 4,500 persons. However, the Board sees this situation being offset by increased employment in the production of coloured television sets and in the servicing of them. That is a matter about which I would have some reservations. I repeat that the Opposition supports the importance of a viable electronics industry, and assures the Government that it will not hamper its attempts through these proposals for subsidisation to achieve such an effective and viable Australian industry.

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