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Tuesday, 7 May 1985
Page: 1746

Mr WILLIS (Minister for Employment and Industrial Relations)(3.57) —The honourable member for Tangney (Mr Shack) must have been absent from this country for the last couple of years because from what he was saying one would have thought that this Government had no runs on the board. This Government, in the two years that it has been in office, has shown great leadership to the country-leadership that was totally lacking under the previous Government. It led this country into an abysmal mess, the worst recession for 50 years. This situation was current when we came to office. That was the point from which we had to take up the leadership of this country and show the way out of the mess created by the previous Government's policies. We had to try to give this country something like the prosperity to which it had become accustomed in the post-war period.

Given the state of the mess that this country was in when we came into office, we found that that was not a task that could be performed or achieved in a short time. We faced the worst recession for 50 years with both inflation and unemployment in double figures and negative economic growth. These circumstances cannot be rearranged or totally overcome in no time, or even in two, three or four years. However, it is a situation that can be gradually redressed and in the period this Government has been in office it has redressed it dramatically. By the policies we have pursued-budgetary, monetary, wages and industrial relations-we have led this country to the strongest economic recovery that it has ever seen. There has been a dramatic increase in employment along with-this is something the previous Government could never achieve-a simultaneous strong increase in employment and a concurrent reduction in inflation. Inflation is now down to 5 per cent, which is less than half what it was when we came to office. Those achievements have come about through the leadership of this Government, through policies which have led this country to a remarkable economic recovery, better than that of any other country in the Western world in the last couple of years and one which provides the basis for continuing prosperity.

It is a nonsense for the honourable member for Tangney to argue that there has been a lack of success, a lack of achievement and a lack of leadership in this country. All those things have been here, par excellence, in the past couple of years. This is in dramatic contrast to the situation that applied in this country in the preceding seven years of the Fraser Government. It is an absurdity to argue, as does the wording of this matter of public importance, that this Government is subject to trade union dominance. That is a lie. It is totally untrue in every respect. The Government has a close co-operative relationship with the trade union movement and that relationship has been used for the great benefit of all the people of this country.

Mr Peacock —Like wage indexation.

Mr WILLIS —Wage earners are not the only beneficiaries; all people have benefited-particularly those who were so badly let down by the previous Government, such as those who receive income from shares. The proportion of total income going to shareholders has increased considerably, as it always does in times of strong economic recovery. That is what we have been able to achieve. Those people are doing much better in the present circumstances than they did under the previous Government. It has not been a recovery only for the wage earners or for the employed but a recovery for all people, which has meant, in particular, a strong growth of employment. That growth of employment has been the very basis of the Government's economic strategy. Our number one objective was a strong recovery of employment. We set ourselves the task of getting a growth in employment of 500,000 in three years and we have achieved 340,000 in less than two years. So we are more than on track in achieving that growth of 500,000.

Growth in employment is extremely important to us and we are sure it will continue. It has been associated with a reduction in the level of unemployment. Certainly, the reduction in the level of unemployment has not been as dramatic as the increase in the level of employment, because each year jobs have to be found for about 120,000 people who come on to the labour market, just with the normal growth of the labour force. Increases in the participation rate also occur as the economy strengthens. Nevertheless, we have been able to knock the unemployment rate back from its peak of about 10.4 per cent in September 1983 to the current rate of 8.8 per cent. The rate jumps around a bit month by month. We expect it to continue to track down over the rest of this year. So in our basic objective of creating employment growth and reducing unemployment, we have achieved substantial success.

This success has been associated with the strongest economic growth that this country has ever seen. The strong economic growth has had much to do with the fact that we have pursued the right policies, including the right wages policy. Our wages policy has done a tremendous amount for this country. Because of our association with the trade union movement and with the prices and incomes accord we have been able to pursue a wages policy in the context of strong economic growth, which has restrained wage growth and has also meant that we have been able to continue to reduce the rate of inflation.

All of those things would not have been possible had there not been a prices and incomes accord. When the people of this country listen to the propaganda from the honourable member for Tangney and from the other honourable members on the other side of the House they would do well to bear in mind the fact that, on all precedents in this country, without the prices and incomes accord there would have been no prospects of having strong economic growth associated with declining inflation. Rather, as the economy picked up income claims would have picked up all round, and that would have been associated with increased inflation. Of course, sooner or later, with continually rising inflation, the recovery would have to stop because of reduced international competitiveness and/or the fact that the Government would have to take restraining action on its budgetary and monetary policies to keep that inflation in check.

That was entirely the situation we were seeking to avoid through the prices and incomes accord. The very thrust and basis of the accord was to provide the fundamental wages and incomes policy which would mean that we would not have to check inflation through budgetary and monetary policies which would destroy growth and create unemployment. We saw that occur time and again under the previous Government. Time and again under the Fraser Government, when the economy looked as though it might be going to struggle onto its feet, inflation soon took off and the previous Government knocked the recovery on the head with budgetary and monetary policies. Inflation was certainly contained to some degree, but unemployment went up to a new plateau. We saw unemployment going up and up under the previous Government because of its failure to achieve non-inflationary growth. It had no policies to achieve non-inflationary growth. It had no budgetary and monetary policies, no wages policy and no industrial relations policy to achieve it.

The accord has as its essence the need for governments to be able to achieve non-inflationary growth, and we have achieved it. It has worked. It has been an astonishing success-astonishing not so much to us, because we believed in it, but to the cynics and the critics among the Opposition who thought it could never possibly work. But it did work and it will continue to work because of the overwhelming support it has had and will continue to have from the trade union movement. That has meant not only that we have been able to get the fundamentals right in getting inflation down but also that we have reduced real unit labour costs. The index published by Treasury is back to the level it was in the late 1960s and early 1970s, which indicates that the imbalances which were created in the mid-1970s have now been eradicated.

We have seen profit share come back to something like its normal level. We have seen international competitiveness restored. We have seen the fundamentals of this country achieved. One fundamental which has not been finally restored is the imbalance on our current account. But that imbalance is not something which can be attributed to us-we have done everything possible to improve international competitiveness-this problem goes back to the policies pursued by governments over the years, which left us with a fundamental imbalance on the current account. With the strong recovery of the economy and the pickup in imports, and the fact that though our exports greatly increased in volume they did not increase in price because they mainly were based on prices determined in the international quality markets, the current account imbalance yawned and the dollar was then subject to devaluation. It is absurd to argue, as did the honourable member for Tangney, that the devaluation occurred because of our wages policy. That is an absolute and total nonsense.

Mr Shack —I did not argue that.

Mr WILLIS —The honourable member seemed to be arguing that. The devaluation of the dollar had nothing to do with any adverse view of the wages policy; rather it had to do with the view that there was some imbalance in the Australian international account which became obvious with that strong economic recovery. However, I agree with the honourable member for Tangney on one point in his speech and that is that the devaluation provides an opportunity for this country. It provides an opportunity which should be seized. This Government has in place a wages policy which can ensure that we can seize that opportunity, that we can turn that devaluation into a very substantial positive for this nation, enabling us to increase employment considerably and to continue strong economic growth. We will be able to do that because of the existence of the prices and incomes accord.

I ask the House what would have happened if the Opposition had been in government, as it was in the Fraser Government years, and there had been a big devaluation of the dollar? What do honourable members opposite say should happen then? What conventional economic policy says a government should do in those circumstances is that it should ensure that wages are restrained, that they do not take off with the increase in inflation which comes about through devaluation. It says that that should be achieved by government toughening up on its budgetary and monetary policies to the point where economic growth is compressed and some unemployment is created, but inflation is kept down and the international competitiveness gained from devaluation is not taken away by an increase in inflation. That is the policy which the Opposition, if it were still in government, would have been forced to pursue. That is the kind of policy which traditional economic policy says one should apply. It would mean increased unemployment and greatly reduced economic growth, at least for the time being. There may be some recovery later but the Opposition would not have the policies to enable economic growth to continue in the longer term because it would not be able to contain inflation.

What our wages policy does through the accord, through the system of wage indexation which has been adopted by the Australian Conciliation and Arbitration Commission and the associated elements of the productivity case, is to provide a basis on which we can make the necessary adjustment. We have said continually that devaluation certainly means that this country has to tighten its belt slightly because devaluation of itself means a reduction of the real income of a country, but that if we handle the matter correctly that can become a basis for considerable increased growth in the future. We will handle it appropriately through the wages policy. It means that some increases in wage costs which could have occurred without devaluation can now not occur. That is what we have acknowledged from the outset, and that is still our position. The precise way in which wage cost increases which could have occurred will not occur is something which we will negotiate with the Australian Council of Trade Unions. That is the most appropriate way. That is something which the accord enables us to do. We do not have to clobber the economy with increased unemployment and reduced economic growth to retain the international competitiveness gained from the devaluation; we can use the accord to achieve that, and that is what we are in the process of doing.

We heard from the honourable member for Tangney absurd tripe about corruption, a total lack of leadership and so on. He showed a total lack of understanding of the whole basis of this Government's policies and of the benefits that the wages policy brings. Perhaps if he does understand them he feels a sort of envy that he will never be able to apply any such policies in the mischance that he and his Party get into government. Of course, the Opposition's policy of total confrontation with the trade union movement means that it would have to go back to all the failed traditional policies of the past-the policies of despair, of increased unemployment, of continuing high levels of inflation and unemployment and of low economic growth-with no excitement, no vision, no achievement and a disaster for the Australian people. The Australian people are not fooled by anything that Opposition members say in this respect. The Australian people can see the tremendous gains that have been made by this Government. The basis for continuing strong growth remains. The wages policy enables us to turn the devaluation into a big plus for this country.