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Thursday, 16 March 1961

Mr WARD (East Sydney) .- It might have been expected that during this debate the Government would have made a precise statement as to what it intended to achieve by its present policy, the extent to which it intended to slow down development, and its intentions regarding the rapid depletion of our overseas reserves. Several Ministers have taken part in the debate and each of them has directed attention to certain steps that have been taken by the Government, but not one of them has told the House or the Australian community what the actual objectives of the Government are. They have denied that it is the Government's intention to re-introduce import restrictions; they have said that it is not the Government's intention to devalue the currency; but they have failed to tell the Australian community what the Government proposes to do if the rapid depletion of our overseas reserves continues. The public could have expected a precise statement in regard to Government policy.

Let us examine for a moment the indecision of the Government. We had an increase of sales tax on motor cars that lasted for 98 days. Never before in the history of this country has there been a taxation measure of such short duration. Every Australian who purchased a motor car during that period and who was obliged to pay that special tax has good reason to complain about the indecision of the Government. Then, we were going to have compulsory contributions to Government loans of surplus funds held by insurance companies and staff superannuation organizations. That proposal was stillborn. The compulsory loans proposal has now been abandoned. What the Government now hopes to do is to try to induce those organizations to invest their surplus funds in government loans by giving them special taxation concessions. According to the Treasurer (Mr. Harold Holt) the removal of taxation deductions in respect of the payment of interest on money raised by debentures, bills and so on by business organizations, was a temporary measure. The Treasurer has not said how long that measure is to remain in force. He has said that it is to be replaced by a more permanent scheme which may not necessarily bear any resemblance to the present scheme. Could there be any greater evidence of indecision than that? The Government itself does not know where it is going, and the members of the general public who have listened to the contributions of the members of the Government to this debate must be utterly confused.

Ministers rise in their places in this chamber and say that there is nothing wrong with the economy, that it is sound and that we are enjoying prosperity. If that is the case, what is the necessity for all these restrictions? On the other hand, we hear other Government supporters expressing concern about the current economic situation. Some say that it is serious. In my opinion, we shall rapidly reach what might be regarded as a critical situation unless the Government can make up its mind to do the things that it is obvious to any rightthinking, Australian citizen should be done.

The Prime Minister (Mr. Menzies) has said that all of our troubles arise from the fact that the nation has been living beyond its means internationally. After eleven years of office, the Prime Minister apparently has only just realized that the nation has, during the whole of that time, been living beyond its means. Yet, in seven out of the last eight trading years we have had a trade deficit, without taking into account the present year. Everybody knows that between 1949-50 and 1959-60, a period of ten years, we have been so far on the wrong side with our trading that it is down to the extent of £1,100,000,000. What is the position this year? For the eight months which ended in February, we were down £182,200,000. Last year, for the same period, we were on the right side by £35,600,000, which means that the position has deteriorated in that period by £217,800,000.

For twelve successive months there have been trading deficits, without taking into account what are known as the invisible items, such as freight, insurance, interest on Government loans paid overseas, dividends and so on. In 1959-60, those invisible items amounted to £233,000,000. That amount must be added to the trading deficit. This figure is £30,000,000 more than that of the preceding year. At the most conservative estimate, invisibles alone will cost us approximately £250,000,000 this year. If we add that sum to the £300,000,000 that we shall be down in regard to our trading, we will have a total deficit for the year of approximately £550,000,000.

How has the Government been able to get by? How does it hope to get by this year? It hopes to do so by means of further foreign investments in Australia. When it is assessing foreign investments, it includes in the figure the undistributed profits of the great foreign organizations that have established themselves in this country. But even on the most generous and extravagant estimate, it would get from those sources, including Government loans overseas, not more than £250,000,000. So, if we make allowance for that amount, despite the fact that we shall be in debt by an additional £250,000,000, we shall still be £300,000,000 short. That amount will have to come out of our financial reserves. Everybody knows that the financial reserves have been reduced to below £300,000,000. To be precise, they now stand at £299,000,000.

When the Treasurer speaks of overseas balances be puts everything in for good weight, and so he includes trading bank balances held overseas which, I understand, amount to approximately £50,000,000. By that means he brings the amount of overseas balances to £344,000,000. Then he says, "We have drawing rights in the International Monetary Fund amounting to £211,000,000". We have nothing of the kind. We have drawing rights up to about £50,000,000, and for the rest, we have only borrowing rights. We have contributed £33,000,000 in gold to the International Monetary Fund, and in return, we are entitled, I understand, to draw up to £50,000,000 from the fund if we can establish that we have balance-of-payments difficulties. If we wish to draw on the balance of the £211,000,000, Mr. Speaker, let me tell you what we have to do. Incidentally, the loans would be for short terms, of from three to five years' duration, to tide us over the difficulties. Unless we were able to repay the loans within the stipulated time the interest rates would be increased and other penalties would be imposed.

The amount of £211,000,000 will be made available to this Government only if it is able to satisfy the International Monetary Fund that the Government has taken the necessary steps within Australia to correct the situation. So, there is ground for the great fear that we expressed at the time we were discussing the International Monetary Fund in this Parliament some years ago, the fear that this super-financial body overseas might some day be placed in a position to dictate the domestic policy of the Australian Government. It might be able to say that the workers of this country, as the honorable member for Richmond (Mr. Anthony) has said, are not working long enough, that they are getting too much in wages and that their industrial conditions are too good. If the Government wants to draw the balance of the £211,000,000 from the International Monetary Fund it will be obliged to conform to the wishes of this world financial organization.

The Prime Minister has said, in effect, " Of course, we have had adverse terms of trade. That has been one of our problems. We cannot control the prices that we receive for our commodities overseas, and therefore we cannot be held responsible for the present position." Everybody knows that the real trouble has arisen because this Government has done nothing at all to control inflation within Australia. The National Bank, in attributing reasons for our adverse trading position, stated in its annual report -

Inflation in these countries to which we sell most of our exports has been brought well under control.

The Treasurer alleged that inflation was under way in Australia during the latter years of the Chifley Government. Let me tell the Australian community the real position. When we were in office we sought power to control prices, and in 1948, when the question was submitted to the Australian community, every member of the Liberal Party and of the Australian Country Party was out telling the Australian people that they had nothing to fear and that prices would actually fall if that power was denied to the Commonwealth Parliament. It was only in the last two years of the Chifley Labour Government's regime, after we had been denied power to control prices - and this Government must accept its responsibility in the matter - that inflation began to move in this country.

Let us turn for a moment to a consideration of the important wool industry. In the last three years the price of wool has fallen by about 34 per cent., but if costs had been held, if the Government had held the inflationary spiral instead of allowing it to advance, these prices would have returned a handsome profit to the woolgrower. What has already affected the position of the wool-grower is the fact that this Government has failed to control inflation and has allowed prices to go on rising. I am told that with prices at their present levels, an investment of £40,000 in wool-growing to-day will give an annual return of only £2,000, and that only in a good season.

I want honorable members to keep in mind that from 1949-50 to 1959-60 the wool industry provided almost half of our export income. So that if you have balance-of-payments difficulties overseas, you have no possible chance of overcoming them if there is anything wrong with the wool industry. Mr. T. M. Scott, the President of the New South Wales Graziers Association, says that this is the situation in the wool industry to-day: -

Wool production is falling .... Expenditure on maintenance and improvements is lessening . . . . Already some capital is being withdrawn from the industry. lt is a well-known fact that anybody who invested his capital in wool-growing in the last ten years, with the inflated land prices that have obtained, could not possibly continue to operate at a profit with prices at their present levels.

Now let me refer to some other important export industries. I will take, first, the wheat industry. According to a reply to a question I asked the Minister for Trade recently, the guaranteed wheat price this year will not be reached overseas. The Wheat Stabilization Fund is in credit to the extent of £4,852,000, and the Minister tells me that in respect of pools Nos. 23 and 24, for the year 1961-62, the Government will have to provide out of its own revenues, to keep the wheat industry afloat, an amount of between £8,000,000 and £9,000,000. We all know what the present position is in the dairying industry. The Government is not prepared to announce its policy in respect of that industry. We can go from one export industry to another, and we must conclude that undoubtedly the difficulties of these industries can be attributed to the failure of the Government to deal with internal inflation.

The Treasurer (Mr. Harold Holt) said that creeping inflation is all right; if it is only creeping inflation you have nothing to worry about. He was asked to specify the percentage rate of inflation that he regarded as satisfactory, and he gave 3 per cent, per annum as the figure. Let me tell honorable members what creeping inflation will do to the people of this country, and why the Australian public refuses to make contributions to public loans to the same extent as it did in previous years. The Government could not fill public loans in this country if it were not for the fact that it sets large contributions from private banks, insurance companies and like institutions. The proportion contributed by the public to government loans in recent years has fallen to a remarkable extent, and if this creeping inflation continued anybody foolish enough to lend money to the Government for a period of fourteen years would lose by the date of maturity 52 per cent, of the value of the capital originally invested. How can we wonder that government loans in this country are failing to secure public support?

The Government proposes to correct the adverse trading situation by instituting what it calls an export drive. There are to be income tax and pay-roll tax concessions, and all commodities are to be included in the export drive. The years 1958-59 and 1959-60 are to be taken as base years. Expenses incurred in fares paid for business trips overseas are to be allowable deductions from income for taxation purposes. Does any member of the Country Party believe that this is going to be of any material assistance to the great primary industries of Australia, which provide 80 per cent, of our export incomes at a conservative estimate?

The Government also intends to expand the Trade Commissioner Service. We are told that this will bring very good results. Any person with any common sense at all can tell you that unless we can sell the right quality goods at the right prices all the trade commissioner services in .the world will not expand our trade. Most of our expenditure in recent years on the Trade Commissioner Service has been in the United Kingdom, and yet in 1960, although imports into Britain increased by 14 per cent., imports of Australian goods had fallen by 11 per cent., and our proportion of sales in the United Kingdom market had actually fallen by 20 per cent, since 1957. This happened despite all the expenditure on the Trade Commissioner Service.

It will be interesting to discover what industries the Government intends to encourage to export. Is the meat industry to be included? We remember that not so very long ago, when drought conditions and herd depletions adversely affected the cattle industry in Argentina, an extensive market for Australian meat was opened up in the United States of America. In that year we sold a good deal of meat in that market, but at the same time the Australian market was being neglected, and the Australian housewife had to pay greatly increased prices for her meat. As a result, the cost of living rose and inflation received another boost.

What industries are to be encouraged to export? To what degree are they to be encouraged to export? Will it be to the utmost limit, regardless of the requirements of our own Australian community?

Let me show the House how serious the situation is. The Export Development Council, which is a body established by the Commonwealth Department of Trade, issued a statement a year ago to the effect that in the next five years we will have to increase our export income by £250,000,000, simply to maintain our existing Irving standards and our present rate of development. The Minister for Trade made a statement in this Parliament in September last that rural production had increased by 11 per cent, in the last four years, while farm incomes were down 11 per cent., and he said it would be unreal to seek a solution to the cost problem in increased production. If that is the case, why did the Government call a conference, attended by representatives of various industries, with the declared purpose of increasing productivity? Why is it necessary to hold such a conference if the Minister for Trade believes it is unreal to expect our great primary industries to increase their production for export purposes?

Where does the Government hope to get additional export income? It says that it will get the income by expanding exports of manufactured goods. Is it not a rather peculiar fact that in February last the Government lifted import restrictions? Who were the people who suffered greatly as a result of the flood of imports that followed the lifting of import restrictions? All the extra imports were paid for with money advanced by the private banks. I believe the decision that was made on that occasion was precipitate and ill-considered. In every month that has gone by since then we have read statements by Government members to the effect that everything will be all right, and that we are now almost over the hump. Well, we are evidently not over the hump yet, because according to last month's figures imports are coming in at a greater rate than the Government believes to be safe. Unemployment is rapidly increasing. The shorter working week has been introduced in many industries. The Treasurer said, when his attention was directed to the degree of unemployment in the country at present, " lt is not serious ". The Minister for Labour and National Service (Mr. McMahon) said, " There is no crisis in respect of unemployment ". I well remember that on a previous occasion when we had a degree of unemployment in Australia, and we directed Lord Casey's attention to it, he being a member of the Government at that time, he said, " It is chicken feed ". That is the attitude of Government members generally towards the unfortunate unemployed. Let us hear what the Minister for Supply (Mr. Hulme) had to say in reply to complaints about the great influx of imports. He said -

The retailers are unfair and are not giving the Australian manufacturers a fair go. Neither are the public in buying imported goods in preference to Australian-made products.

What a ridiculous statement to make, when the Government has repeatedly said that its purpose in removing the restrictions and allowing imports to be uncontrolled was to bring an increased flow of imports into Australia which, it claimed, would in turn bring about a reduction in prices and a fall in the cost of living resulting in a reduction in general costs. Everybody knows that the action has not had this result at all. Australian manufacturers have unused capacity in their industries to produce the many things that are required and which are at present being imported. Whilst the Government called manufacturers together and asked them to make a special effort to increase their exports, it met its own requirements of rolling stock for the Commonwealth Railways from Japan, and at the same time, Australian heavy industries were short of orders. The Commonwealth Government went to Japan for that rolling stock because, as the Minister for Shipping and Transport (Mr. Opperman) admitted, the Australian manufacturer could not compete at the price that was offered by the manufacturers of Japan who employed cheap labour.

As my time is running out, let me turn to the question of cost of production. Sir Leslie Gamage, a British industrialist, has stated -

Costs of production were Australia's major problem in export competition with countries like Germany and Japan.

Away back in 1955, even the Prime Minister said -

It is quite clear that we can enter the great markets that are waiting for us only if we can do so at competitive prices.

The "Public Affairs Bulletin" of AprilJune, 1955, stated~-

One way to solve the balance of payments problem would be to drastically reduce effective demand. This would mean a serious lowering of Australian living standards.

Of course, it would. Is it not rather farcical that with growing unemployment in this country, I should be told by the Treasurer, in reply to a question to-day, that the Government has decided not to maintain the flow of immigrants at 1 1 5,000 a year but actually to increase the number by 10,000 to 125,000? Where are these people to go? As there is now a shortening of employment in Australian industry, they can only get work by displacing people who are already in employment. If they do not, they will have to go on Commonwealth relief.

In the couple of minutes remaining to me, I shall make one or two suggestions, because the Government has been very anxious to know what we would do. We say that import restrictions should be immediately restored on a selective basis. We do not regard that as a final solution, but we regard it as an urgent matter because of the rapid flowing away of our international funds. We say that there ought to be a review by the Tariff Board of the industries in this country that have unused capacity and can produce many of the goods that we import. According to the Australian Industries Development Association, there is unused industrial capacity which could produce goods which would replace imports and save £272,000,000 of our imports bill. We further believe that there ought to be an immediate appeal for constitutional powers for this Commonwealth Parliament over prices, profits, capital investment, and interest rates, and we ought to have a uniform company act.

I mentioned the extent to which invisible items of expenditure were increasing year by year. One thing that the Government could do would be to establish a national shipping line to carry Australian products overseas and thereby save this country an enormous amount of expenditure year by year on export freights. Let me tell the

Government, finally, that if it permits the shipping companies of this country to be foreign owned and controlled, Australian industries will be prejudiced further.

Mr. SPEAKER (Hon. John McLeay).Order!The honorable member's time has expired.

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