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Monday, 25 February 1985
Page: 152

Mr HUNT(8.35) —Firstly, I congratulate the honourable member for Cowan (Ms Jakobsen) and the honourable member for St George (Mr Dubois) for having delivered their maiden speeches in this place. I wish them a very fulfilling experience here, if not an enduring one.

Thursday's outline of the Labor Government's plan or program was a very depressing document indeed for Australian agriculture. In no more than 20 lines and six sentences it dismissed the rural areas of Australia with a talkfest and a year 2000 document. Unless attitudes change, a rural crisis will engulf Australia long before the year 2000. The recent disturbing Budget deficit estimates, the balance of trade deficit and the collapse in the value of the dollar should be a warning to all Australians that our honeymoon is over. They underline the need for responsible responses on the wages and economic management fronts. They point to the need for governments to take the tough decisions. Blow-outs in money supply, sudden reversals in crucial government policies and a wave of crippling industrial disputes have not helped to engender any confidence amongst investors, either in Australia or overseas. Government policies have been the biggest contributor to the decline of the Australian dollar, which has lost 30 per cent of its value against the United States dollar in less than three years, and half of that loss has occurred this month.

The rapid downturn of our economic prospects leaves no other responsible choice to the Hawke Labor Government but to take the hard decisions to reduce public expenditure and to keep wage increases down to the lowest possible levels. No longer can we ignore declining export competitiveness and industry profitability. In heavy overseas borrowing and excessive wage increases, dating back to 1974 when the present Prime Minister (Mr Hawke) was President of the Australian Council of Trade Unions, we have seen a successful attempt to trade short term gains in take home pay for declining competitiveness and long term falls in our relative standards of living. Australia is now becoming less able to repay its debts, at a time when those debts are going through the roof. The foreign debt bill has exploded from $40 billion last year to about $60 billion today; more than $10,000 for each Australian family. It is time for a reappraisal of economic policy. Priorities must be changed to maximise real economic growth, raise competitiveness and progressively reduce our accumulated national debt.

The key to economic recovery lies in our ability to maintain and increase export markets for our agricultural, mineral and other export products and services at competitive prices. Only by raising export income will Australia begin to repay its rapidly increasing debt. It should be of great concern that the primary producers have been allowed to slip behind other sectors of the Australian economy. In fact, primary producers will suffer an average 17 per cent cut in income this year as a result of an accelerating cost price squeeze, and sluggish commodity prices.

Mr Hodgman —How much was that again?

Mr HUNT —A 17 per cent cut. No other sector of the Australian community has had to suffer such a cut. Agriculture today returns an average 2 per cent to capital, which is about 20 per cent of the average level of profitability of other industry sectors, yet primary industry is the first trigger which sparks off an economic chain reaction, undergirding the standard of living of all Australians.

The dependence of the economy on primary income is the focus of a recent publication, entitled 'Australia and Argentina: On Parallel Paths?' The authors suggest Argentina's slide from wealth reflects the damage caused to primary industry by adverse tax and assistance policies. The end result was a balance of payments crisis for Argentina. These same warning lights are now flashing in Australia, with our trade deficit likely to blow out another $2 billion to an estimated $11 billion or more than 20 per cent, by the end of this financial year.

Commenting on this Australia-Argentina theory in the Sydney Morning Herald on 23 February, Peter Freeman argued that our own economy was less likely to slump due to the strength of a rural sector built on private enterprise and supported by coalition policies over the years. Peter Freeman was courteous enough to ignore the Australian Labor Party; and the farmers know that Party's form only too well. However, the Hawke Labor Government will ignore the importance of rural Australia at its peril and at the peril of every Australian. The Hawke Labor Government must adopt positive economic initiatives which will allow primary industries to maximise their domestic and export potential. For too long governments-State and Federal-and others have regarded farmers as wealthy backwoodsmen whose resources are up for grabs. For too long we have witnessed the successful transfer of resources from rural Australia to other sectors of the economy, including the industrial and public sectors. For too long Australian governments have run away from the challenge of reducing industrial protectionism. In a speech in Japan last year the Prime Minister made the right sounds only to be pulled into gear by the unions. The Hawke Government now has its chance to tackle the level of tariff protection. We must have immediate adjustments to tariff levels or domestic prices will rise and the resulting pressure on the consumer price index will further increase wage rises where there is full indexation under the so-called accord. In short, we risk a new inflationary spiral. The resulting cost pressures will hit primary industry hardest of all as it is the sector least able to pass on cost increases. It is the sector least able to afford cost increases. The Hawke Labor Government must act to remove the devaluation effects from wage adjustments regardless of pressure from its behind-the-scenes master, the Australian Council of Trade Unions.

The great feature of a free exchange rate is not only that it has the capacity to keep governments honest-including Treasury and Reserve Bank administrators-but also that it reminds trade union leaders, industrialists, exporters, importers and others of the importance of acting responsibly in the market place in terms of prices and wages. If wage rises outstrip productivity, the resulting inflation further reduces our competitiveness on tough world markets. Of course that leads to further unemployment. Excessive protection encourages irresponsible wage demands and settlements. In reducing protection we must be mindful not only of the low levels of profitability experienced by primary producers but also of the effective rates of assistance to industry at present. Since the start of the last decade, effective assistance to agriculture has been lowered from 28 per cent to 8 per cent, yet manufacturing today continues to enjoy assistance at the rate of 24 per cent, down from 36 per cent over the same period. In other words, the rate of reduction in the level of protectionism has been reduced twice as fast for agriculture as for the industrial sector of the community. We should also be mindful of studies which have drawn a conclusive link between high levels of protection of manufacturing industry and poor manufacturing export performance. The Minister for Trade (Mr Dawkins) must act in this area to achieve his stated and commendable goal of boosting our manufacturing export trade but he will not succeed in that objective by picking winners and directing trade resources to those so-called winners.

Despite primary producers' extremely tight margins, they have not sought direct financial aid except in extreme situations where industries face massive short term upheavals resulting from economic difficulties beyond their control. What they seek is stable, predictable government with rational macro-economic policy and a readiness to take the hard options where necessary. There has been massive reconstruction in agriculture in Australia. In the dairy industry, the total number of dairy farmers has dropped from 49,000 to 19,700 since 1964. To counter its problems the industry has after 12 months of exhaustive negotiations developed a national marketing plan acceptable to the vast majority of producers. In a disgraceful show of petty politicking, this plan has been rejected at three meetings of the Australian Agricultural Council by the Victorian Labor Government.

Although the industry has undergone reconstruction further problems face the industry due to the huge dairy stockpiles resulting from European Economic Community and United States subsidy policies. The Victorian and Federal Labor governments should stand condemned for the obstruction to the implementation of a modified national plan which has been thrashed out by the various dairy groups in the States. There is absolutely no justification for any attempt by the Minister for Primary Industry (Mr Kerin) to impose an alternative plan based on the Industries Assistance Commission recommendations which are rejected by most sections of the industry.

The self-help dairy industry plan, as with most current rural industry proposals, would have little impact on government outlays. By contrast, there are occasions when economic events outside the control of the industry threaten short term, but devastating, social damage to whole communities. In those circumstances short term aid is justified, if not essential. The highly efficient sugar industry faces such a crisis today because of the huge subsidised surplus of sugar from EEC countries being dumped at give-away prices.

The industry is making every effort to produce a scheme for long term self-rationalisation, but in the meantime faces a 1985 No. 1 pool price of $230 a tonne, which will barely cover costs. In 1986, the pool price is likely to drop to about $180, and in 1987 it will be around $140 to $160. By guaranteeing a minimum average price of $240 a tonne the Government would at least offer the efficient producers a chance to remain in the industry. Temporary assistance would be only a marginal recompense to an industry which has subsidised Australian consumers to the net value of more than $300m over the past decade.

To fail the sugar industry at this time is to fail the most efficient sugar industry in the world to the advantage of heavily subsidised beet growers in Europe. At two elections the Hawke Labor Government has promised assistance and then walked away from its commitment. A maximum $16.5m has been forthcoming from the Federal Government, while the Queensland Government has contributed more than $30m over the same period to bridge the industry over this difficult crisis. The inadequate contribution of the Hawke Labor Government to date makes a mockery of the Prime Minister's assurances to the industry in Brisbane a week before the last election to 'undertake a financial commitment . . . which is going to result in a strong and viable industry'.

The steel industry in Australia three years ago was receiving average effective aid for a range of products of 14 per cent. The Government's steel industry plan has raised bounties from $1m in 1982-83 to an estimated $52m this financial year. If it is good enough for the Broken Hill Proprietary Co. Ltd, with its approximately 29,000 employees in the steel division, in its hour of need, it is good enough for Australia's 20,000 workers directly employed in the sugar industry and another 100,000 whose jobs indirectly depend on the industry. That sort of assistance should be good enough for an industry which earned $617m in export income in 1983 and more than $1 billion two years earlier.

The future of all Australian primary industry lies largely in external markets. Most of our industries are highly efficient and able to supply domestic orders and have a capacity to produce at a relatively low cost increasing volumes for export. However, the subsidy policies of Europe are blocking efficient lower cost food production with their high cost subsidised surpluses. The Opposition was pleased that the Prime Minister and the Minister for Primary Industry responded to calls by farm groups to visit the EEC personally and explain to the new Commission our traditional markets, especially in the Asian-Pacific Basin. However, there remains some uncertainty over what was achieved in those talks and whether guarantees were in fact watertight. It is essential, therefore, that the Minister for Primary Industry report to this Parliament as soon as possible on the outcome of their negotiations. To delay this report will only heighten the uncertainty now confronting producers, especially those engaged in our vital beef trade on dwindling Asian-Pacific basin markets. We must not have a repeat of the Prime Minister's refusal to make such a report following his February Asian tour last year.

There is one other aspect of Government policy which will be crucial to the future, not only of primary industry but of all industries in our economy and the people of this country. They must be confident that they have stable, responsible Federal government which is committed to national macro-economic policies and concerned to improve our competitiveness and trade performance. Sadly, the events of the past few weeks indicate otherwise. The MX missile fiasco was one of the most disastrous foreign policy moves ever undertaken by an Australian Prime Minister. It seems incredible that the Prime Minister of Australia should have been forced to make a panic decision to break an agreement with the United States while on foreign soil but only a day away from his official visit to the United States. Surely if he had to make a backdown to his faction-riddled Labor Party he should have continued his visit to the United States where he could have had a full, frank discussion with President Reagan explaining the reasons why he, as Prime Minister of Australia, had to break an undertaking given in 1983.

The repudiation of his agreement with the United States is a major victory for the socialist Left of the Labor Party. It is a major victory for the Soviet Union and its communist allies. The majority of Australians have every reason to be disappointed, if not devastated, over the apparent weakness of the Prime Minister in backing down to members of his radical Left and their fellow travellers of the Centre Left. If this can happen in a policy area as important and fundamental as our alliance with the United States, it could happen to any Labor policy. The devastation of confidence at home and overseas has been clearly reflected in the fortunes of the dollar.

In conclusion, I call on the Hawke Labor Government to give clear, unequivocal commitments to the primary industries of Australia and then to carry through those commitments. The farm costs summit, the tax summit and the 'Year 2000' report will all give the Hawke Labor Government an important opportunity to establish the needs of the rural sector and to act on those needs. On the other hand, it cannot use those reviews as a shield behind which to hide a lack of substantial policy. It must recognise the rightful place of the primary sector in the Australian economy as a first step to recovering some of the ground that has been lost. It must recognise that there is a crisis in the dairy, sugar, dried fruits and rice industries with wheat, grain, sheep meat, and other industries not far behind. There is a crisis of confidence in agricultural Australia and action must be taken right now to ensure that agriculture does not crash in Australia as it has done in Argentina.