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Tuesday, 4 December 1973
Page: 4210

Mr SINCLAIR (New England) - I think it is significant that the Treasurer (Mr Crean), who has just spoken, concluded his remarks by saying that it is necessary for the Government to have an armoury of weapons at its disposal. We are not talking about an armoury of weapons. We are talking about the degree to which, in controlling inflation in the Australian community, there will be a beneficial effect from a Yes, Yes vote advocated by the Government in Saturday's referendum. We are talking about the degree to which price control is able to bring inflation under control. We are talking about steps that the Government would implement if there were to be a positive vote at the referendum. Have any of those answers been given by the Treasurer, the man who as Treasurer of the Government would be responsible for initiating those policies? In fact, he has not given us any policies. What he has done is explain why he sees there is a necessity for more power to be passed to the Commonwealth Government, or the Australian Government as its supporters like it to be termed.

In fact, the Treasurer has demonstrated, firstly, that the Government has no policies that it will implement if it gets the power; and secondly, it is uncertain whether, were the power to be exercised, it would really control inflation, because if it would control inflation the Government would be prepared to come out and expose those policies. There would be nothing that would hold it back. Government supporters would be prepared to tell us in what way, to what degree, in which area and in which categories of goods there was going to be price control. They would tell us how wages were going to be held down, how profits were going to be contained, and how land prices were going to be restricted. We certainly have had a statement from the Minister for Urban and Regional Development, who is now sitting at the table, that through land commissions there will be some restraints on land price movements in these new designated growth centres. The T. C. Winter report refers to land control and includes the suggestion that if price control is introduced there will be a power for the Commonwealth Government to contain the price that the average home owner receives for his house when it is sold.

We have not heard from the Treasurer or Minister for Urban and Regional Development how that power is to be implemented. Indeed, Mr Deputy Speaker, there is as yet no positive program from this Government, simply because I do not believe that many of them have their hearts in a Yes, Yes vote. So let us be honest. We are not talking about a prices and incomes policy. Most honourable members on the Government side are talking about a prices policy. An incomes policy is already opposed by significant sections of the Labor movement. It was opposed in Caucus by just short of a majority of members of the Caucus, so that there is a significant body of opinion within the Government that does not accept that there should be an incomes policy, and it is of no use for either the Prime Minister or the Treasurer to come in here and advocate that they need more powers. They do not tell us how they are going to apply the powers, but tell us that they need more powers for something that a significant percentage of their people are not prepared to support anyway. Essentially we come down to the question that we are looking at in the House today; that is whether or not price control is an answer to Australia's inflationary experience.

Let me refer briefly to the views of Professor Michael Parkin to whom my colleague, the Deputy Leader of the Opposition, referred in his speech earlier today. For those who did not hear the background of Professor Parkin, let me reassert that he is a visiting research economist with the Reserve Bank of Australia. Professor Parkin is as distinguished an economist as any of those persons who signed a letter, published recently, to which I will advert in a moment, in which those persons supported a yes, yes vote in the forthcoming referendum. In expressing his views on the Australian Broadcasting Commission program Monday Conference' on 19 November 1973, Professor Parkin said, in relation to a vote in favour of price control but against income control:

If, however, one part of it is carried and the other part not, and it's clear which would be carried if one part was carried, then I think it would be absolutely disastrous to attempt to implement direct controls on a particular and probably as it would turn out relatively narrow range of prices - those that are easiest to police and easiest to keep check on - and if that was to be implemented, I think that for a short period, perhaps three or four months, you could make the rate of inflation look as if it had gone away, but I would predict that during- or towards the end of - such a period, there'd be a series of shortages and bottlenecks of various kinds; perhaps the price of beef would have been contained, but if there's no beef on the shelf in the shop, its not much good to be told that its price has been stabilised, and I think that's the sort of thing that follows from too rigid an adherence to direct controls of wages and prices.

In other words, if there is to be a positive vote for price control and a negative vote for incomes control, the sorts of policies that would be introduced are said not only by Professor Parkin but also by many in the community to lead to a complete distortion of the normal market forces in our community, to the development of black marketeering and to the development of pressures to supply goods which are not influenced by market demand. Whether a particular commodity will be available for supply to a customer, say a housewife, who wants it will not depend on market - demand but on whether a public servant situated in Canberra happens to put that particular category of goods on a price control list which will mean that the manufacturer will not be able to make a profit on it.

If honourable members think that surely that would not happen, let me refer to the report that was prepared for the Government in a very short period by Mr T. C. Winter. It is entitled 'Power over Prices and Incomes'. I pay due respect to Mr Winter for the fact that, in spite of the shortness of the time available to him, he has produced some very valid reasons why price control just does not work. In paragraph 16 of that report, dealing with the distortion of production, Mr Winter states:

Firms subjected to price controls that they regard as unreasonable may react by cutting off production (and maybe employment)-

But, of course, the Government has not spoken about that: withholding their product from the market or redirecting it to exports, reducing or redirecting investment, or changing product standards.

In other words, even Mr Winter has said that there will be complete distortion in the marketplace.

If we are talking about the views of economists - I think it is important that we look at the economic aspects of price control - there are several comments in the report which again are worthy of note. In paragraph 12, Mr Winter points out:

Thus Lipsey and Parkin, in an econometric appraisal of incomes-prices policy in post-war Britain, concluded that the - Data are not inconsistent- with the view that wage and price restraints have usually been ineffective in restraining inflation and also that the restraints have sometimes actually had the effect of raising the rate of inflation above what it would otherwise have been. This perverse effect is very noticeable in the most recent periods of 'restraint' since 1966.

In other words, not only is there a suggestion that price control is unlikely to contain inflation but also it is suggested that price control might even aggravate it. Direct reference is made to the experience in the United Kingdom to demonstrate that this is so. So, it is nonsense for the Treasurer (Mr Crean) or for the Prime Minister (Mr Whitlam) to claim that the reason why they are advocating a yes vote is to contain inflation. The only reason why they are advocating a yes vote is that they seek more power for the Commonwealth.

Again, if we look at other aspects of the application of the Winter analysis of the control of power over prices and incomes, in paragraph 27 of his report we are told:

Governments need to consider very carefully the direct costs of extensive price controls {as well as the indirect costs through dislocation of efficient resource allocation) against the modest 'benefits that might result.

So, we have a suggestion of a distortion of the economy, a suggestion that inflation will not be controlled and the statement of a very real need to consider the direct and indirect costs to the community of the application of price control. We see as a result that, if this referendum were to 'be carried on Saturday next, very real doubts would be cast in the community >as to the degree to which inflation would be brought under control.

It can be said that a number of professors of economics have said that this is just what the Commonwealth needs. It is interesting to look at the letter I mentioned earlier because, first of all, not all professors of economics are in agreement. Let us leave aside for the moment the names of those who signed that letter. It is interesting to note that there are 12 signatories to it. Some apparently believe that some form of direct intervention by the Government is now required. But apparently others do not agree with them, because the letter states:

Others believe that while a national prices and incomes policy may not be required at present Governments should have this power.

In that letter, in what the Treasurer has said today and in the statements by the Prime Minister, the one constant theme is that what this Labor Government is seeking is not a control of inflation at all. It is seeking an aggrandisement of the power which it can exercise in Canberra. We on the Opposition benches are worried about inflation. We are worried about the effect that the increasing costs of labour have on the average citizen. We are worried about declining productivity. We do not believe that the Government has the will or the intention to contain inflation-

Mr Bourchier - Nor the wit.

Mr SINCLAIR - Nor the wit, as my colleague from Bendigo says. We believe that this Government is concerned only with an increase in its power. The Australian people should reject completely the referendum next Saturday.

Mr DEPUTY SPEAKER (Mr Drury)Order!The honourable member's time has expired.

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