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Tuesday, 26 February 1985
Page: 193

Mr HOWARD(3.00) —The economic news-indeed, most of the news-of the nation over the last couple of weeks has been dominated by the fall in the value of the Australian dollar. There can be no doubt that the fall in the value of the Australian dollar which has been recorded over the last several weeks is in part-I stress in part-a direct result of a fall in the level of confidence in the economic management and resolve of the Hawke Government. That decline has taken place not only domestically but also internationally. If we wanted any evidence of why people overseas are now having real doubts as to whether what they previously perceived to be relatively responsible economic policies pursued by the Prime Minister (Mr Hawke) and the Treasurer (Mr Keating) any longer prevail, we found a very good reason for those doubts in Question Time yesterday and Question Time again today.

Yesterday, in answer to a question I put to the Prime Minister, he got up and-I paraphrase the answer he gave-said: 'I agree with you that the economically sensible and rational thing to do is to discount the next national wage case for the effects of the devaluation on the consumer price index. That is the economically responsible thing to do, but I cannot do it because I am bound by the terms of the prices and incomes accord'. That is what the Prime Minister was saying yesterday. He was, in effect, giving official ratification and confirmation to the view that buying industrial peace is more important than the longer term economic health of Australia and is more important than the impact on the unemployed of Australia of a wage determination system that increasingly this country cannot afford.

As the Prime Minister and the Minister for Finance (Senator Walsh) acknowledged yesterday, the depreciation of the Australian dollar of recent weeks, despite the adverse effects of it and despite the fact that it represents some failure or loss of confidence by others in the policies and the assets of this country, confers some competitive gain and edge on our export and import competing industries. The Prime Minister did not dissent from that point of view. However, the important thing is that, if we are not to suffer all the disadvantages of a depreciation of our currency, we must be willing to insulate our import competing and export industries from the adverse price effects of that depreciation. The only way we can do that is by insulating those industries through the wages system. Increasingly, what is happening, of course, is that the floating of the Australian dollar has imposed strains upon our wage fixation system and has demonstrated how inappropriate our wage determination system is.

Instead of standing up yesterday and saying to the Australian public that the Government would be willing to discount for the effects of the depreciation of the Australian dollar, the Prime Minister rather supinely threw up his arms and said: 'I would like to do it. I know it is the economically responsible thing to do, but I cannot do it because it would break the prices and incomes accord'. What he was doing, as he did over the MX missile issue, was saying that when it comes to a choice between numbers and duty he will choose numbers any time. He has demonstrated that time and again. He demonstrated it over his failure to dismiss the Special Minister of State (Mr Young) from the Cabinet on two occasions; he demonstrated it over the MX missile issue and he is demonstrating it again by his failure to follow the only economically rational course in the wake of the depreciation of the Australian dollar. What the Prime Minister knows in his heart and what proper observers of the Australian economic scene know is a reality, and it is a reality that I pointed out in December 1983 when the Government floated the Australian dollar, a decision that I warmly welcomed then and still welcome as one of the very good and praiseworthy decisions that the Hawke Government has taken. I said on that occasion:

Now that the dollar has, quite properly, been floated, the Government can no longer 'fudge' the exchange rate in order to protect it from the consequences of inappropriate and irresponsible domestic fiscal, monetary and wages policies. The dollar float imposes a new discipline on the Government. There is little prospect that the industrial wing of the labour movement and the left-wing of the Labor Party will respond to that discipline.

If ever we had a demonstration that the Government would not respond to that discipline, we had it yesterday when the Prime Minister was unwilling to give the only economically responsible answer to the question that I asked. It is no wonder that this morning the Australian Chamber of Commerce, one of the largest business organisations in Australia, had this to say:

The business community views with complete bewilderment the Prime Minister's statement that the Federal Government would support the passing on to wages of the inflationary effects of the recent decline in the Australian dollar. The statement will only serve to undermine the value of earlier statements by other senior Cabinet Ministers and by the Prime Minister himself on the need to engender business confidence.

That is not a bad smack in the eye from the President of the Australian Chamber of Commerce. It is no wonder, because it is an example of the declining domestic confidence in the economic policies of this Government.

I have said repeatedly over the past several weeks that there are external reasons for the decline in the value of the dollar. It is not the fault of the present Government or, indeed, any Australian government that these have occurred. I refer, of course, to the strength of the United States dollar and the fact that as a commodity trader we, in common with all other commodity traders, have seen our currency depreciate because of the depressed level of commodity prices. But there one must end the exculpation of the present Government because when one moves to the other set of reasons, one finds that this Government is very much to blame. I and other Opposition members have said repeatedly over the past couple of weeks that the humiliating retreat of the Prime Minister over the MX missile issue has broken in a very significant way the confidence that many people had in him in the economic area. I was told repeatedly by people in the financial community in the United States when I followed the Prime Minister's visit there a couple of weeks ago: 'If he backed down to the left wing in this issue, he will back down to the left wing on other issues'.

The decline in the value of the Australian dollar represents a vote of loss of confidence in the leadership of the Prime Minister, the Treasurer and this Government. There is no way that the Government can wriggle and worm out of that because a floating exchange rate tells the story and tells it quickly, plainly and without any kind of fear or favour. That is what makes a floating exchange rate a far better method of running one's exchange rate than other systems. That is why a floating exchange rate continues to have the support of the Opposition and, to his credit, the support of the Treasurer. No doubt he hopes that somehow or other, the realism that a floating exchange rate brings home, will make some of his colleagues aware of many of the difficulties.

This loss of confidence in the economic policies of the Government is not something that has arisen only over the last couple of weeks as exemplified by the fall in value of the Australian dollar. One can go back to the Budget of last year. If ever there was an election Budget, if ever there was a Budget designed purely and simply for the polls and not for the medium or the longer term, it was the 1984 Budget. It was a Budget that I described at the time as 'a political document, based on the vote now, pay later principle'. That Budget maximised short term electoral possibilities, but I warned at the time that next year it would present major economic problems on the budgetary front. Of course, those major problems are now becoming apparent. Even in areas where the Government was able in its early months of office to point to some level of success, a slow down is starting to occur. This is happening, for example, in the employment area. Remember how much we were regaled by the Government about the improvements in employment that had taken place since it was elected? Total employment, seasonally adjusted, grew by 3.1 per cent in the 12 months to March 1984, but in the 10 months to January 1984 it has increased at an annual rate of only 1.6 per cent. Real interest rates-that is, the gap between the nominal rate and the rate of inflation-are now the highest that they have been for two generations. This Treasurer not only presided over the highest tax take in Australia's history in the last Budget and the highest level of expenditure in Australia's history in the last Budget, but he also now presides over the highest real interest rates that this country has seen since the end of World War II. No wonder people here and overseas are starting to vote a lack of confidence.

Of course, the Treasurer and the Prime Minister are not alone. It amuses me no end to see Labor premiers running around the world inviting foreign banks to establish headquarters in their particular cities. Who else could I think of this week but the Victorian Premier, Mr Cain, who has not been slow to run around the world inviting this and that bank to establish its headquarters in Melbourne and to a parade all the marvellous advantages of having the headquarters of a bank in Melbourne. There is absolutely nothing wrong with having the headquarters of one's bank in Melbourne. Melbourne is a terrific city. The only thing wrong with it at the moment is its State Government. If ever a person were aligned, in terms of policy attitudes, to those policies of the Federal Government which are now losing favour internationally, it is the Premier of Victoria. Not only has he a sorry record of increases in taxes and charges and of mortgaging the future assets of Victoria's instrumentalities to an unconscionable extent to overseas lenders, but to the Victorian Premier belongs the dubious distinction of being the first political figure in office in the Western world to say that facilities for nuclear-powered vessels would not be available in his port. The Victorian Premier was even two years ahead of the New Zealand Prime Minister in saying that visits by nuclear-powered warships would not be welcome in Victorian ports. I quote from his remarkable statement in 1982, when he declared:

. . . visits by nuclear-powered or nuclear-armed warships to Victoria from any country are not welcome.

Everybody remembers that, fortunately, that exercise in anti-Americanism by the present Victorian Premier was very smartly put down by the then Prime Minister, Malcolm Fraser. It is very interesting that as far as Mr Cain's ideology and his attitudes are concerned, he was even two years ahead of the New Zealand Prime Minister. That gives us an idea of the nature, the calibre and the quality of the leadership of that Government.

I realise, Madam Deputy Speaker, that I digress a little from my comments on the management of the national economy, but the point must still be made that the economic policies that I condemn, the economic policies that have eroded international confidence in the Australian dollar, are fully supported by that same Premier who led the break out at the 1983 Premiers Conference, where at the last minute the Treasurer got rolled and had to give another $400m in funds to the States.

The last two weeks has seen the coming together of various strands which indicate a loss of confidence in the economic management of this Government. It faces an horrendous problem on the wages front. Not only has it a wage indexation system that this country cannot afford, but the secretary of the Australian Council of Trade Unions has said that this country has the most beneficial wage fixation system for the trade union movement of any country in the world. On the wages front, the Government also faces the difficulty of what to do with the productivity case. It faces the problem of putting together a Budget in 1985 when it will have to pay the price of its electoral vote-buying Budget of 1984 and in many other areas it faces an erosion of the international competitiveness of Australian industry. Most importantly, it faces a Prime Minister who no longer has the authority and respect that people previously believed he enjoyed.

Madam DEPUTY SPEAKER (Mrs Child) —Order! The honourable member's time has expired.