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Thursday, 15 August 1974
Page: 1038

Senator Greenwood asked the Minister representing the Prime Minister, upon notice:

(   1 ) Did the Prime Minister and the Minister for Overseas Trade state on 18 July 1973 that inflation could be onset by an increase of supply of goods to Australia.

(2)   Did they jointly state that tariffs were to be reduced so that imports might increase in the short-term to help meet inflationary pressures in Australia.

(3)   Has the tariff reduction led to an increased supply of goods to Australia.

(4)   Has inflation been offset; if so, in what way.

Senator Murphy - The Prime Minister has provided the following information for answer to the honourable senator's question:

(   1 ) No. See statement on tariff reduction in House of Representatives Hansard of 2 1 August 1973 on page 167.

(2)   Yes.

(3)   The value of imports of goods and services in constant price terms was 3 1 per cent higher in the first three quarters of 1973-74 than in the corresponding period of the previous financial year. Although constant price estimates are not yet available for the June quarter 1974 a similar rate of increase is thought to have occurred during that period. Hence for 1973-74 as a whole imports would have contributed over 40 per cent of the increase in total supplies of goods and services, an unprecedented contribution from the external sector. The increased flow of imports reflected the confluence of several factors, including the growth of domestic demand pressures, the external revaluation of the Australian currency and the tariff cuts referred to. Although it is impossible to determine with any accuracy what part of the substantial increase in imports was due to particular factors, the tariff cuts undoubtedly contributed to the increase.

(4)   The increased volume of imports referred to in (3) has assisted in diverting pressures from domestic resources and hence in countering inflationary demand pressures. The slowing in the rate of price increase of imported goods consequent on the tariff cuts has had direct effects on final prices within Australia as well as indirect effects via increased competition between domestic and overseas supplies. Retail prices do not, however, appear to have reflected the full effect ( see answer to question No. 7 ).

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