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Tuesday, 7 May 1985
Page: 1752


Mr HOWARD(4.30) —The legislation now before the Parliament is the first legislative part of the mechanism which is required to give effect to the Government's decision announced some weeks ago to license the entry into Australia of some 16 foreign banks. It is, therefore, a piece of legislation of very considerable historical interest as far as the Australian financial system is concerned. This is also an opportunity for this House to debate briefly aspects of deregulation of the financial system which have occurred over the last few years.

I take the opportunity at the commencement of this debate to say on behalf of the Opposition that we unreservedly support the Banks (Shareholdings) Amendment Bill, as we have unreservedly supported the decision of the Government to admit into Australia some 16 foreign banks-a decision which has quite properly and quite deservedly drawn considerable praise and credit for the present Government and the present Treasurer (Mr Keating) from many different sections of the Australian community. I take this opportunity, at a parliamentary level, of saying again that, whilst there are many things that this Government has done that the Opposition disapproves of and will continue to disapprove of-and the debate on the matter of public importance which has just concluded very amply indicated that there are many aspects of the Government's economic policies that we disapprove of-the Government has embraced quite a number of things in the area of deregulation of the financial system which have been of very considerable importance. To the extent that the Australian Labor Party, in office, has put aside the foolish opposition to deregulation of the financial system that it exhibited in opposition, we welcome that change of attitude and we welcome the substantive decisions which have flowed from that change of attitude.

On that note, this debate is also an opportunity to reflect for a moment upon the change of attitude that has come over, I suspect, not all but, to be charitable, I guess a fairly large number of people who now sit on the Government benches. It is perhaps ironic that sitting opposite me is the Minister for Employment and Industrial Relations, the honourable member for Gellibrand (Mr Willis), because he was the spokesman on economic matters for the Australian Labor Party when the report of the Campbell Committee of Inquiry into the Australian Financial System was actually brought into the Parliament in 1981. When I brought the Campbell report into the Parliament in 1981 I think it would be no exaggeration to say that it was not greeted with unanimous joy and relief. There was a cry of almost collective horror from members of the Labor Party when I brought the Campbell report in. The Minister for Employment and Industrial Relations, who now sits on the Government front bench, was then the Labor Party spokesman on economic matters and shadow Treasurer. On 17 November 1981 he said quite categorically on behalf of the then Labor Opposition that the report was one of those reports that, under no circumstances, the Labor Party or a Labor government could ever accept.

If one goes through the Press reports of that time and analyses the statements that were made by the then spokesman for the Labor Party on economic matters, one finds that those reports are absolutely replete with references by the honourable member for Gellibrand. He described the Committee as 'having been possessed of social blindness', he complained about its naive recommendations on interest rates, and his then Leader said that higher costs were going to follow acceptance. One headline in the Australian Financial Review of 19 November stated 'Willis Lashes Committee Over Interest Rates'. On the same date a headline in the Canberra Times stated 'Some Proposals Nonsense Says Willis'. If one goes through all the reactions of the Labor Party at that time one finds a blind, obstructive hostility.

In the interests of objective debate I would have to be fair and acknowledge that, at that time, one or two people on my side of politics were not terribly enamoured of the recommendations of the Campbell report. I would have to reflect that, in November 1981, the cause of deregulating the financial system in Australia was far from the most popular thing around. Deregulation has become very fashionable now. Everybody is on to it. I know that there are some people in the Labor Party who are not really on to deregulation and I do not think that the honourable member for Gellibrand is all that rip-roaringly happy about the Government's decision on letting in foreign banks or floating the dollar. But the Government has taken those decisions and one has to accept that he fully supports decisions that have been taken by the Government. But back in November 1981 financial deregulation was not nearly as fashionable as it is now. There were plenty of people who looked back on the experience of the 1950s and 1960s and came to the rather simplistic conclusion that that period of 20 years had given us unrivalled and quite remarkable prosperity-a fact that was acknowledged at the National Economic Summit Conference in 1983 by the present Treasurer when he said that the 1950s and 1960s were periods of great prosperity. In fact the honourable member for Barton (Mr Punch), who spoke to the matter of public importance, said that we now have profit levels back to what they were in the 1950s and 1960s, as though the 1950s and 1960s were the great decades of economic endeavour and achievement in Australia.

Coming back to November 1981, I think the problem was that a lot of people opposed financial deregulation and a lot of people were scared of financial deregulation because they thought that the reason why the 1950s and 1960s had been periods of great prosperity was that they were years in which governments intervened, governments regulated and governments controlled our financial and economic sectors. The fact is that they were periods of economic prosperity and growth irrespective of government intervention, despite government intervention in many areas and despite government controls. In November 1981 there were not too many people who were very interested in the cause of financial deregulation. There were plenty of people-certainly all the members of the Labor Party and, to be fair, a number of people on the coalition side of politics-who were willing to argue that the whole idea of significant deregulation of the Australian financial system was something that ought to be put completely aside and something that ought to be completely forgotten.

Circumstances have now changed although the change in the attitude of members of the Labor Party did not occur until they came into government. I think it is worth recording that not only did the then shadow Treasurer, the present Minister for Employment and Industrial Relations, the honourable member for Gellibrand, express very strong opposition to the whole philosophic and ideological basis of the Campbell report and say that it was guilty of social blindness and insensitivity, that it was naive and that it was talking nonsense but also, when the present Treasurer, the honourable member for Blaxland, replaced him as shadow Treasurer in late January 1983, he immediately picked up the same rhetoric. I know that, to many who have read over the last few months of the contribution of the present Treasurer and praise that he deservedly got in that time for his work in deregulating the financial system, it is a matter of some interest to reflect on what he had to say on 24 January 1983. It really is thoroughly ironic that on that date, just after he had become the shadow Treasurer, he had this to say:

And once the foreign banks are here they will not be interested in retail banking, they won't be interested in small business or farm finance or housing finance, indeed they won't even have a branch structure where one would facilitate the arrangement of such finance, so the likelihood is they will be looking after the large slabs of wholesale banking to the top echelon to the corporate sector, and it would be very soon thereafter that our Trading banks require the Australian Government to free it of the controls, the regulations which now provide this finance to the retail end of the market at deferential rates.

That is almost a museum piece of the troglodytal thinking that used to dominate the Australian Labor Party on that issue. That sort of sentiment was not expressed in New York a couple of weeks ago when the Treasurer was there. It is to the national good that he has put away the foolish notions of this political childhood on that particular issue and that he has now adopted more sane and more sensible attitudes. It is interesting to reflect once again, as we on this side of the House have had occasion to reflect, that one of the judgments that are made in the long term about the political contribution of people in this Parliament to political life in Australia is the extent to which they demonstrate responsible behaviour both in government and in opposition. It is all very well for the Treasurer, the Prime Minister (Mr Hawke) and others in the present Government to run around patting themselves on the back and saying: 'Aren't we terrific because we have let in all of these banks and we have done all of these marvellous things'. When it was not so fashionable to support deregulation and when it was a lot harder politically, where were they? They were in with the best of them stirring up all the primeval opposition and all the old community suspicions about these things.

This is not a time to be uncharitable because the Opposition and I are very pleased that we are to have a more open and more competitive banking sector as a result of the decision that was announced by the Treasurer a few weeks ago. For the record, I remind the House that the entry of foreign banks into Australia has in fact been delayed for over two years by the action of this Government. It appears to have been forgotten by many people that the former Government announced a definitive decision to admit foreign banks into Australia early in 1983. Predictably, as I indicated earlier, that decision was denounced and lambasted as being in the interest of wicked overseas capitalist and monetary interests and to the detriment of little Australians and all that was good and pure about Australian commercial, corporate and, I dare say, family life as well. It was roundly denounced by the present Treasurer but, of course, the Damascus road has got very crowded indeed when it comes to financial deregulation.

I am very happy to say that the present Treasurer has now adopted the policies that I supported both in government and in opposition and has put aside his rather old fashioned hostility to foreign banks. Responding to that old adage that imitation is the sincerest form of flattery, I should be mightily impressed and flattered that a policy that was called social blindness by the present Minister for Employment and Industrial Relations and denounced by the present Treasurer when he was in opposition has now been adopted.


Mr Hunt —You have a lot of disciples.


Mr HOWARD —They have gone out and multiplied, if one can pursue that biblical analogy, quite a lot over the last couple of years. It is very interesting that they have only gone out and multiplied since it became a little more fashionable to believe in financial deregulation. Two or three years ago nobody wanted it.


Mr Hand —Don't get too carried away.


Mr HOWARD —The honourable member for Melbourne says that I should not get carried away about the fashionability of deregulation. That is a marvellously interesting statement. These debates would be no good without the contributions of the honourable member for Melbourne. A couple of other things about the very interesting history of this issue ought to be said in this debate. This gives me an opportunity to say something about the committee whose recommendations ultimately led to the decision that we are now debating. I refer to the Campbell Committee of Inquiry. Many famous committees have been established by governments of both political persuasions in Australia over the years, such as the Campbell Committee, the Asprey Taxation Review Committee, the Vernon Committee of Economic Inquiry established by the Menzies Government and the royal commission into banking that was established in 1936. One could go on and on. We are going to have the report of another quite important committee in the next couple of days, the Hancock Committee of Review into the Australian Industrial Relations Law and Systems. I do not think that will be too replete with deregulation but we will wait to see whether there has been a Damascus road conversion on the subject of labour market deregulation, because if there has that would be very remarkable.

Going back to the Campbell Committee, I think one thing can truthfully be said-this is no reflection on the calibre of the people who sat on other great committees of inquiry in Australia-that is, that the Campbell inquiry has probably turned out to be the most successful of all the great committees of inquiry that have been established by any Australian government in our history. Now that we look back on what has been done in this area, we find that just about all of the major recommendations either have been substantially implemented or are on the path to being implemented. It is a matter of some pride on this side of the House that a committee that was set up in the face of sniping and of criticism that it was unbalanced, one-sided and that it was too ideologically pure and too committed to free market principles-a reflection on the judgment that was made by the former Government at the time that this Committee was set up in 1979-has been so outstandingly successful in having its recommendations implemented.

In that context, it is very interesting to reflect, if I may for a moment, on an editorial that was written, no doubt, by that well known political and economic commentator, Maximilian Walsh, who was then the Managing Editor of the Australian Financial Review, on 19 January 1979, the day after I had announced the establishment of the Campbell inquiry. Mr Walsh reflected on the composition of the Committee. After welcoming it and writing quite a generous editorial about the then Government's decision, he lamented the fact that I had not put, as he called it, a Ben Chifley on the Committee of Inquiry. Mr Walsh took me to task for not having diluted the Committee, so to speak, with a representative of the trade union movement or a representative of, as he called it, the other point of view or the other side of politics.

I do not in any way denigrate the memory of Ben Chifley; he occupies a very honoured place not only in Labor Party history in Australia but in Australian political history generally. What has come out of the Campbell report and the fact that so much of it has been accepted is perhaps a lesson to all of us that the idea that when a committee is established every point of view should be put on it is not such a sound idea after all. To get the best results we first of all ought to have a clear idea of the general direction we want to go. Having done that, we pick four or five people who really believe in going in that general direction. Governments on both sides have made the mistake, having identified a problem, of appointing a committee while not having a clear idea of where they wanted to end up. They appoint a representative of every point of view to the committee and they think that out of that they are going to get some marvellous solutions that will satisfy everybody. The reality is that often out of that process we get a solution that does not really satisfy anybody at all.

Having made that reflection, I also take the opportunity, as I have done in the past, of acknowledging on behalf of the coalition parties the enormous contribution that was made by the late Sir Keith Campbell. From my personal acquaintance with him I can say that he was one of the finest members of the Australian business community I have ever met. He was a very hard working man. He never said no to doing another job for the community or for the Government. I have not the slightest doubt that one of the reasons for his premature death not long after the change of government in 1983, after his attendance at the National Economic Summit Conference, was in fact the enormous work load he undertook. But of all the things that he did in his public career none will be a more enduring monument to him than the report that bears his name and which has been the philosophical mainspring for so much of what has happened in this area over the last few years.

This debate is therefore an opportunity to reflect a little on the way in which attitudes have changed within large sections of the Labor Party on this issue. That change is a very good thing. I have not the slightest doubt that ultimately the final interest rate controls-that is, interest rate controls on housing loans-will go. It is only a matter of time. It is appropriate that the Minister for Housing and Construction (Mr West) is at the table. Although he and some of his mates in the Left grin as much to say 'That is what you think', it is interesting to note that the other day when the Treasurer announced the abolition of controls on small business loans under $100,000 he used the argument-a very sound argument, I might say-to justify their removal which is precisely the argument that ultimately will be used by him to justify the removal of interest rate controls on housing loans. That argument is that if, when we have upward pressure on interest rates, we control the rate at which banks can charge interest on money they lend out we will impair their capacity to get money in the first place, so we will have the old scarcity problem arising and the only way we can solve that, of course, is to decontrol interest rates. It is only a matter of time before that occurs. Let me say on behalf of the Opposition that if the Government moves in that direction it will not be the subject of criticism from us; we would support such a move.

Having said a couple of complimentary things about the Government and having acknowledged the change of heart that has occurred on the part of the Treasurer and many others as far as financial deregulation is concerned, let me get on to one other area of deregulation. As this Bill largely concerns deregulatory matters, it is appropriate that I say something about it. I refer to the next area, in fact the new frontier, of deregulation in Australia-that is, deregulation of the labour market. We have talked a bit about going out and multiplying, but I will believe in miracles if the Australian Labor Party ever embraces deregulation of the labor market. If there is one great blot on the economic escutcheon in Australia at present it is our highly centralised labour market.

Just as I am ready to acknowledge the good sense of the Government in moving towards deregulation of the financial system, as it has done over the last two years, I am equally critical of the way in which during that same period it has regulated and made far more rigid and controlled the labour market in Australia. I am not the only person to say that there is some incompatibility between a regulated labour market and a deregulated financial system. I say to the honourable members who sit opposite that this will not be the last time they hear about that dichotomy. There are two remarkable things about the Hawke Government's decision in December 1983 to float the Australian dollar. Firstly, given Labor's long history of interventionist attitudes towards the financial system, it is remarkable that the Hawke Government, to its credit, took that decision. The other remarkable thing is that I do not think many people in the Government or in the Australian Labor Party's rank and file realise the implications of that decision. A floating exchange rate exposes the economy of a country, in a far more direct, immediate and brutal manner, to the economic judgments of the rest of the world. Those judgments are evident now. Incidentally, this would still happen under an administered exchange rate but it would happen in a more indirect manner. We have experienced for the first time over the last few months the volatility that comes from a floating exchange rate.


Mr West —The former Prime Minister would not let you float the dollar.


Mr HOWARD —I am not expressing the views of any member of the last Government other than myself on this subject. All I can say to the Minister and to others opposite is that over the last few months we have seen the effects of that volatility, and many people in the Labor Party who watched the decision of the Government to float the dollar in December 1983 and who said that it seemed like a good idea are now starting to realise what it all means. It is now sinking in. That is why the Government is in such a terrible bind over the question of the discounting of wages. What it cannot explain away in economic terms is that if we have a depreciation of our currency the country is made poorer whether we like it or not, and if one section of the community says that despite that national impoverishment it wants real wage maintenance, it is saying to the rest of the community that they have to cop an even greater reduction in their living standards to maintain the living standards of that particular section. That is what Simon Crean and Bill Kelty are saying at present, and that is why the Government has been hooked on this dilemma right from the beginning of this session, when the Prime Minister was asked a question on this subject and said: 'You are right economically but I cannot do it industrially'. Then the Treasurer said: 'Hang on, Bob, we might have to do it or the business community will not like us any more'. They have been backing and filling and dodging and squirming on this issue ever since because they cannot face that reality. As the honourable member for Mackellar (Mr Carlton) said in the matter of public importance debate that has just concluded, the strength of the trade union movement on that particular issue makes it impossible for them.

I return to my theme of a moment ago. I will really believe in miracles if the Labor Party can embrace deregulation of the labour market. Now that deregulation of the financial system is substantially completed-the Labor Party has played a significant, proper and creditworthy role in that-we must ask whether it really does believe in deregulation. It does not. My friend the honourable member for Charlton (Mr Robert Brown) shakes his head and indicates that no, they do not really believe in it. What he is really saying is: 'Financial deregulation is all right provided it does not cause any ripples, letting these foreign banks in is probably okay now because everybody seems to go along with letting in some foreign banks and we do not really like the Australian banks anyway'. That is the attitude of the Labor Party. The Treasurer made that fairly clear at the New South Wales ALP Conference a couple of years ago, when he had a few choice things to say about the existing trading banks in Australia.

Let us really see how good members of the Labor Party are on deregulation, see how they react to deregulation of the labour market, because that is the new frontier of deregulation. If they really believe in deregulation, if they really want to peel away some of the restrictions, particularly on the small business sector, if they really want to ask themselves why it is that over the last couple of years eight million to nine million new jobs have been created in the United States while in the whole of western Europe, with an equivalent population, no new jobs have been generated, if they want to ask themselves why it is that the growth potential that exists in the small business and service sector of Australia is not being fully realised, if they want to find out why it is that there are renewed concerns about the impact of a system of rigid full wage indexation in Australia, they have to recognise the one very obvious answer, which is that we have a highly centralised, rigidified, over-regulated labour market in Australia. It has been made infinitely worse by the actions of this Government and, although it has taken off certain controls in the financial area, it has confounded the effectiveness of that by adding still further controls in the labour market area.

Until such time as the Labor Party embraces the need for deregulation of the labour market it has absolutely no right to lay claim to any really full-blooded commitment to the deregulation of the Australian economy. I believe that over the next couple of years this will be the area of great debate in discussions on economic management in Australia. Once again, it is an area that it was not terribly fashionable to talk about a short while ago but it is amazing that over the last six or nine months a great many more people have started to take up the cause of deregulation of the labour market. It will become a far more popular cause to espouse. There is a very obvious reason for that, and that is that people have looked at what has happened in other countries. They have observed the astonishing vitality of the economy of the United States which draws in large measure from the great flexibility of the American labour market. That is the new frontier of deregulation in Australia. It is a cause that we on this side of the House full-bloodedly espouse. I wonder whether the Labor Party might, in the fullness of time, as it did on the question of the financial system, go along the Damascus road on the deregulation of the labour market.


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