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Thursday, 9 March 1961

Mr CREAN (Melbourne Ports) .- Mr. Speaker,surely no one could assert seriously that the present economic situation is one of stability; nor, I would suggest, in the face of the daily announcements of dismissals of people from employment, could it be seriously argued that many people can expect increasing prosperity. It is true to say that not for many years have Australians been so apprehensive as to what the future holds for them. I think that the only point of the speech made by the Acting Prime Minister (Mr. McEwen) with which I can find much agreement on this side of the House is his diagnosis of the trouble. But we certainly are not in agreement with his prescription for treating the ills that particularly menace the Australian economy at the moment. The right honorable gentleman spoke of these things and he listed them in order.

First, there rs the acute balance of payments problem and, secondly, the continuance, at the same time as we face recession and the diminution of employment, of all the symptoms of inflation. That is anomalous in many ways, because traditionally when people fell out of work the tendency was for those who believed in something that they called the law of supply and demand to assert that decreased employment would lead to reduced prices, and that things would adjust themselves. But in Australia to-day there is stagnation in large sections of the economy, although at the same time there is no fall in the prices of the goods and services that industry still manages to produce.

I take these two problems in order. As I say, I agree with the Government's diagnosis, but we on this side believe that the proposed treatment is entirely wrong. The statement of the Acting Prime Minister serves only to highlight the basic difference in the philosophies of the Government and of the Opposition. We believe in approaching these questions from the point of view of humanity.

Mr Pearce - Socialism.

Mr CREAN - I repeat, we believe in approaching them from the point of view of humanity. We reject the ancient, outworn shibboleths to which the party of the honorable member for Capricornia adheres. But I will come back to that in a moment. It is rather interesting, Mr. Speaker, to hear the Acting Prime Minister so glibly deny the suggestion that his Government believes in controls. I suggest that if he meant that he did not believe in socially desirable controls but believed in the anti-social controls, which he chooses not to call controls, that might be a fair statement of his views.

The other thing that characterizes the approach of the Government to the economic problem is how simply its members explain the steps they are taking and how complicated they make any suggested alternative policy sound. The Acting Prime Minister said that the Government did not believe in controls. So, let us come back to this basic question - the question of Australia's balance of payments. In a few minutes I will quote some figures which show that the balance-of-payments problem has not just emerged during the last six or eight months. It has existed pretty well for the life of this Government, because the Government has failed to grasp what is involved in the problems of economic growth in an economy such as Australia's. It is all right for the Acting Prime Minister to talk about having no controls, but the history of the Government from 1951 to 1960, even in terms of this thing that he now says he discards - import controls - has been one of on-again-off-again.

I should like to go back, just to refresh the memory of the House, to what the former Treasurer said when he was Acting Prime Minister, again presumably at a time when the real Prime Minister was abroad. In announcing import restrictions which were to operate from 1st October, 1955, with the object of reducing imports by about £80,000,000, he said, when speaking of the fall in Australia's overseas reserves in 1955-

If the fall is to be arrested more quickly import restrictions alone cannot be relied on. Domestic measures must be adopted calculated to reduce the demand for imports.

In those days at least, the then Treasurer used import controls as a part weapon to abate this particular problem, and he said that if we did not use them sensibly we would have to take domestic measures of another kind calculated to reduce the demand for imports. The present Government's principal spokesmen - the Prime Minister, the Minister for Trade, who is now Acting Prime Minister, and the Treasurer (Mr. Harold Holt) - all have discarded the weapon of import controls as though they have no intention of using it again. If they do discard the weapon of import controls, then I suggest that they need to be a little more specific about what these other measures may be that are calculated to reduce the demand for imports. Already one can begin to see the pattern of what they may be. We have the spectacle of unemployment in considerable sectors of the Australian economy. We have also the spectacle of the Commonwealth sending an advocate the other day to appear before the Commonwealth Conciliation and Arbitration Commission in a wages case, to say that he was neither for nor against the submissions being made by the trade unions, although the whole burden of his argument - and he put it very pointedly to the commission - was that it would be dangerous in the present circumstances to raise the wage level in Australia because of the critical condition which the economy faces, particularly in regard to imports.

Now, here is where you get the basic cleavage between this side of the House and that. You on the other side are prepared to allow a certain amount of unemployment to develop, but you are not prepared to interfere with certain other people's economic freedom in order to reduce the flow of goods and services into this country. Apparently, it is not considered interference with freedom when thousands of people lose their jobs altogether. That is regarded as just the inevitable working of economic forces. I suggest again that that outlook pinpoints and highlights the difference between this side of the House and the other.

We say, and we emphasize it, that when your economy is basically dependent, as Australia's is, for what it can import upon the prices and the quantities of a certain number of primary products, you cannot say categorically that you will not resort to such economic controls as import licensing. If you discard import licensing, and if you discard as an alternative - and the Government has announced its intention to do so - some degree of revaluation of the exchange rate, is it not obvious that you must come back to the third alternative, which is described as exchange control? Of course, in the Government's view that is a dirty term, and the Government will not call it a control. It will say that it is a purely economic measure, leaving those who want to import, and who are allowed to import, say, only £90,000 worth of goods instead of £100,000 worth, to decide exactly what kind of imports they will buy with the £90,000. The decision will be left to them, irrespective of whether the imports they bring in are essential to the welfare of the Australian economy or not. The decision will be theirs, even if th*:v decide to import timber, while people in Tasmania who produce Australian timber are being thrown out of employment, as the honorable member for Braddon (Mr. Davies) told us yesterday. If that is the Government's conception of economic freedom, then T do not want any part of it; nor, T think, do any other honorable members on this side of the House.

Let me return to a point that I made previously. Whether you like them or not, you have got economic controls of one kind or another in this community at the present time. You have controls over wheat sales. You have controls over sugar sales. You have controls in the banking system. But of course our glib Acting Prime Minister says that these are not controls. I wish to refer to an article in a journal which is before me, and I commend it to both the Acting Prime Minister and the Treasurer. It comes from a source to which I would not normally go for endorsement. I quote from Lloyd's Bank Review for January. 1961, which contains an article entitled. " Bank Advances as an Object of Policy ", by the Right Honorable Sir Oliver Franks, who was chairman of the Lloyd's Bank Board and who was also a member of the

Radcliffe Committee, which sat in Great Britain over a number of recent years. The author talked about the difficulty of using only bank credit, or the restriction of bank credit, as an economic weapon. He recognizes that in Great Britain, as in Australia, the banking system rules over a smaller proportion of the economy in 1961 than it did in 1931. He recognizes also that in many respects credit restriction is not a selective enough instrument. He makes an analysis of advances made by his bank - I have no comparable figures for Australian banks - and he says -

By number, 98 per cent, of the banks' borrowing customers were in the smallest of the ranges chosen-

That is the range covering overdrafts of from about £1,000 to £10,000- but accounted for only one-third of the money lent. The remaining two-thirds of the money went to the 2 per cent, of larger borrowers.

I suggest that this kind of pattern applies in the Australian economy, and surely, when it comes to restricting credit, it is easy to cut down on the small people, while it is quite dangerous from a bank's point of view to cut down in the same proportion on the big people. The instrument is also, I suggest, a blunt instrument. I repeat that what is being attempted in this country is a cutting down of the flow of imports. Yet this Government, in our view, discards the only selective instrument capable of doing the job, relying on the blunter instrument of bank advance policy.

Then we have the gimmicks that were introduced to us yesterday and which are, we are told, designed to encourage export trade. Again it seems that an argument is going on in the Cabinet about this matter, because some people say that if these measures work at all the principal beneficiaries will be large companies like General MotorsHolden's Limited and Broken Hill Proprietary Company Limited. Another point that this Government does not seem to grasp is that when the motor vehicle industry is expanding in Australia, as it is at the present time, it must reduce the capacity of a show like the Broken Hill Proprietary Company Limited to export, because it uses more steel inside the Australian economy. Yet the principal beneficiaries under this scheme will be these two animals that eat each other.

Have a look at the annual report that is sent out by General Motors-Holden's Limited and you will find that the wages bill of that company is in the region of £25,000,000 to £30,000,000. If we indulge in a quick mathematical exercise we find that pay-roll tax on a wages bill of £25,000,000, at 6d. in the £1, comes to about £600,000. As I have said, these companies would be the principal beneficiaries. But if General Motors-Holden's Limited so ordered its policies that it was able to have the whole of this pay-roll tax abated, docs any one think that that would have a significant impact upon what is the real problem so far as Australia's balance of payments is concerned?

I want to cite certain figures to the House. They are taken from statistics published in the Reserve Bank of Australia Statistical Bulletin for November, 1960. I have endeavoured to get an overall picture of the position of Australia's balance of payments during the last five years for which figures are available, the period from 1955-56 to 1959-60. In that period Australia paid out in accumulated profits, in dividends and in interest to overseas investors in Australia the large sum of £487,000,000. In the same five-year period the deficit on our visible trade picture - that is the excess of imports over exports - amounted to a further £268,000,000. making an accumulated outgoing over the five years of £755,000,000. This Government looks only at one barometer in interpreting the position of its overseas funds. It looks only at the barometer of London funds, and so it consoles itself with the thought that despite this colossal adverse balance of £755,000,000, it appeared that the London funds had risen by £83,000,000. But why had the London funds risen by this amount? They had risen because of the increase of direct investment in Australia - that is, foreign ownership of economic activity in Australia - by £453.000,000.

Now we see the new trend, which this Government should be alarmed about, because to a large extent it is speculative. Investment in existing Australian activity - not pioneering new shows, but burrowing and buying into old ones - amounted to £299.000,000. The total of overseas investment in Australia, then, amounted to £750,000,000, and still the Government, through various international agencies, borrowed something like £100,000,000. In this way we paid nearly £268,000,000 more for imports than we earned from exports because we increased the toll that we pay to overseas investors. This is not something that has been happening only in the last few months nor even since the colossally stupid decision to remove import controls in February last year.

To-day, the Acting Prime Minister has said that our real problem is related to bulk primary products. I agree with him. If Australia were obtaining more for its wool than it has been getting we might be able to have this policy of squander. But we cannot have a policy of squander while we fail to grapple with the real problem. I do not like being pessimistic about this sort of thing but I think we are entitled to ask how long this deterioration can go on. How long can we continue with a situation in which the only people whose backs bear the burden are people on wages and other fixed incomes? The Government does nothing about the price policy of the large undertakings which are the principal source and generator of internal inflation. The Government does nothing but send somebody to the Commonwealth Conciliation and Arbitration Commission to suggest that it would be a calamity if the worker were ever to get back to the point from which he had slipped during the previous twelve months. Then the Government claims in this place that Australia has never had it so good!

I agree again with the Acting Prime Minister that inflation is not a good thing. But he does not realize - or does not recognize - that inflation continues because inflation is a good thing for some people. Inflation is a good thing for those who control prices and push their own incomes up; but it is a bad thing for those people whose incomes are controlled through the machinery of industrial tribunals and for people on fixed incomes such as pensioners. They are lucky if they ever get back to the point from which they slipped. The easiest section of economic activity to control is that which comprises large undertakings. The record of large organizations such as General Motors-Holden's Limited and the Broken Hill Proprietary Company Limited shows that patriotism is not enough to make them pursue a policy in the interests of Australia. They are making huge profits.

They could earn foreign exchange but they prefer to get the most they can from the local market.

I do not think that the tiddly little measures on which the Government is pinning its hopes face up to the fundamental problem. Everybody here, particularly members of the Australian Country Party, knows that for a number of years the major source of our export earnings must be wool and wheat and base metals. Gimmicks such as sending motor cars or machinery to Hong Kong or Asia do not touch the basic problem. The Labour Party has taken a fundamental step here to-day. It has moved a no-confidence motion because it believes that the Government which, unfortunately, continues to occupy the treasury bench has no comprehension of the difficulties that face Australia economically, both internally and externally. It is true that there is the problem of inflation internally, even though we face economic recession at the same time. The external problem has to do with the balance of payments. But this Government, in the face of economic adversity, adheres to ancient dogmas and is prepared to throw away the only sensible weapon that can grapple with the problem. We say that a government so acting is no longer worthy, if it ever was worthy, of the confidence of the people of Australia.

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