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Tuesday, 9 November 1976
Page: 2449


Mr WILLIS (Gellibrand) -This matter that is now before the House is an important matter not only because the economy generally is obviously very important but also it is especially important because almost exactly one year ago this Government seized office substantially on the basis that the then Government was incompetent in its handling of the economy. Having grabbed office by breaking all the conventions of political behaviour in this country, the Liberal and National Country Parties have shown over the past year that they have no answers to the economic ills of this country. The latest frantic moves on the weekend show that the Government is no nearer to finding an answer. In fact those moves on the weekend fit into a pattern that is now well established in other areas of economic activity- that of treating business too generously and creating off-setting problems that have to be corrected. I refer particularly to the taxation and wage policy, and I will come to that later on.

The measures announced on the weekend will have some effect in further inhibiting economic recovery despite what the Treasurer (Mr Lynch) says. In fact it is very interesting that his statement seems to be a fairly casual statement in the sense of trying to persuade people that there would be no real problems created by these credit restrictions. But if one looks at the statements by Mr Knight, the Governor of the Reserve Bank, one can see that a rather different picture emerges. He said that the SRD call up would reduce the banks' free liquidity to relatively low levels and that further call ups may be made. He added that the increase in the SRD ratio was being accompanied by a request to the trading banks for some further moderation on the growth in their financing and that savings banks and permanent building societies were also being made aware of the need to avoid an upsurge in their lending.

Mr Knightis saying that the bank lending has already been curbed, that it would be curbed further, quite aside from the SRD call, and that other finance groups have been warned not to try to make up the short falls created as the banks lent less. That is a different picture entirely from that given in the Press statement on Sunday night by the Treasurer or now in this House by the Treasurer. In fact, the moves on the weekend will have a restrictive effect and they will further inhibit recovery and perhaps cause more unemployment in this country, and that is an important matter certainly worthy of discussion in this House. I think it is also important to reiterate the fact that at the present time, early in November 1976, the Budget deficit is approximately $250m higher than it was this time last year before the then Government was thrown out of office. This is the situation confronting a government which when in Opposition berated the then Government left right and centre for the extraordinary level of the Budget deficit and suggested that astronomical deficit levels would be created if this trend continued. We are now in a situation where the Budget deficit is substantially higher than it was at that time last year. Again this shows the incredible irony of the situation. I would also point out that despite the fact that there have been substantial efforts by this Government to borrow overseas and also through increases in treasury note interest ratesthe Government has tried on 3 occasions in the last 10 weeks to get more money from this source- the fact is that the deficit is still being largely financed by printing money. Remember how we used to talk last year and the year before about financing deficits by printing money? The then Opposition used to berate us daily with that kind of talk. Here it is, in government, printing money like mad to finance the deficit which it has created. In fact over the last 4 months it has borrowed from the Reserve Bank $ 1,000m in treasury bills to finance the deficit. So who are honourable members opposite to talk about a Labor Government printing money to finance its deficit when they are doing it as fast as can be? Because they are worried about the fact that they are doing that, these measures were taken at the weekend.

It is again ironic that the major reason for their having to take these restrictive measures at the weekend was that they had been trying to be over-generous to business in this area. They abolished the quarterly company tax payments, which were instituted by the Labor Government, with the result that company tax collections in the first 4 months of this year were $43m compared with $528m in the first 4 months of last year. Quite clearly if quarterly company tax payments had been continued the Government would not have needed to undertake the restrictive measures announced at the weekend. Another $500m-odd would have been in the accounts and therefore there would have been no need to worry so much about the increase in the money supply which has necessarily been created by the need to go to the Reserve Bank and borrow $ 1,000m worth of Treasury bills. All of this money sloshing around that the Treasurer is talking about is largely the result of his own policy of cutting out company quarterly tax payments. It seems to me that if he had allowed company tax payments on a quarterly basis to continue it would have been a far better result for business than restricting credit and increasing interest rates in the way of the announcement at the weekend.

It is also very important to reiterate just how bad the state of the economy is at present. The really key indicators are worse than they were at this time last year. For instance, the number of registered unemployed is 15 000 higher than it was at this time last year. That means we will have much higher levels of unemployment at Christmas time and in the January period than we had earlier this year. I also comment in passing that the figures for the registered number of unemployed will be somewhat understated in the next few months because this Government has tightened up on the work test particularly in relation to not paying unemployment benefits to school leavers and leavers from tertiary institutions. Right now students leaving universities after finishing their courses and enrolling for jobs are being told that they will not receive any unemployment benefit until next February. A lot of these people will not bother registering and the unemployment figures will be understated. Even so, I suggest figures will be substantially higher than they were last year. The registered number of vacancies is 700 less than at this time last year. In the last month the figure fell by 800 on a seasonally adjusted basis, a factor which the Minister for Employment and Industrial Relations (Mr Street) forgot to mention in his statement announcing the latest unemployment figures. The latest survey of the Bureau of Statistics on unemployment showed that 4.8 per cent of the work force was unemployed- that is the highest figure recorded. Last year at this time the figure was 4.6 per cent.

Even on inflation the Government's record is nowhere near as good as it tries to make out. The fact is that over the last 12 months inflation in this country has increased by 13.9 per cent. In the previous 12 months to that it was 12.1 per cent. Where is this great advance in control of inflation about which we hear so much? Over the first 9 months of this year inflation increased by 7.9 per cent; last year in the first 9 months it increased 8 per cent. So congratulations to the Government; it has reduced inflation by 0. 1 per cent in the first 9 months of this year. Whichever of these 2 important indicators, unemployment and inflation, one looks at, the fact is that they are both in a worse state than they were at this time last year.

One can go through the various other indicators but time does not permit. I make the point that if one looks at the Government's economic policy strategy in relation to taxation and wages the fact is that both of those policies have been geared in a way to try to assist private business but in trying to do so they have had off-setting effects which are detrimental to private business. On the taxation side the concessions which will cost hundreds of millions of dollars this year and over $ 1 ,000m next financial year, have had to be offset by substantial costs in government expenditure. Those cuts in government expenditure are daily creating more unemployment and the evidence is there for anyone who wants to look. Time does not permit me to go over the evidence but it is there for anyone who wants to see it. Company after company is now complaining that its business is being affected by cuts in government expenditure. The same relates to the wage policy. The cutbacks in the real level of wages to transfer income from wage earners to profit earners might be beneficial to business in the very short run but if it means that consumers therefore will not increase their consumer expenditure and will not buy more goods and use more services business will not be assisted and thus the economy will continue in recession for a long time.







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