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Thursday, 8 December 1983
Page: 3555

Senator GARETH EVANS (Attoney-General)(7.29) —I move:

That the Bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

Leave not granted.

Senator GARETH EVANS —This bill gives effect to the undertaking by the Government to establish a Prices Surveillance Authority. This body is an important part of the Government's prices and incomes policy and its establishment will honour a major commitment by the Government as part of the prices and incomes accord. The Government's mandate to establish the Prices Surveillance Authority has been widely recognised in the community, including by business in the National Economic Summit Conference communique.

Following the National Economic Summit Conference a working party was established to provide advice to the Government on the legislation for the establishment of a prices surveillance body. I seek leave to incorporate the remainder of the speech in Hansard.

Leave not granted.

Senator GARETH EVANS —The working party, comprising representatives of the trade union movement, business, state and local government and community groups has been extensively consulted by the Government in drafting the Bill I bring before the Senate. Before explaining the measures provided for in the Bill, I would like to make some remarks concerning the Government's approach to prices surveillance. I seek leave to incorporate the remainder of the speech in Hansard .

Leave granted.

The speech read as follows-

The Government is firmly committed to restoring economic prosperity in Australia and to bringing about the sustained high rates of economic growth that are necessary to reduce present high levels of unemployment. At the same time inflationary pressures need to be reduced so that economic recovery can proceed unhindered. The Government's policies, based on an effective prices and incomes policy, are directed toward achieving these goals of sustained non-inflationary economic growth.

Substantial portions of the Government's prices and incomes policy are now in place. Establishment of the Prices Surveillance Authority will help to complete the implementation of this policy and will encourage price restraint as a counterpart to the wage restraint being exercised by wage and salary earners under the wage fixation principles established by the Australian Conciliation and Arbitration Commission.

I draw the attention of honourable senators to the title of this Bill, which indicates that the scheme embodied in the Bill is one of price surveillance, not price control. The Prices Surveillance Authority will monitor and examine prices . It will not attempt to hold down prices by administrative fiat. The Government is well aware that the private sector employs the majority of workers in Australia and that it must play a central part in any broadly based economic recovery. We recognise also that sound profits are an essential requirement for increased employment in the private sector. The approach of this Bill reflects these concerns. The best form of price restraint comes from the effective operation of competitive market forces. The majority of businesses in Australia operate in competitive market environments, and the effectiveness of the constraints that this imposes on prices is illustrated by the very low profitability that has applied over the past eighteen months.

An increase in profitability from last year's historically low level will be a necessary part of any broadly based recovery. Prices surveillance will not be used to impede such a development. Recognising this need, the approach to price surveillance envisaged in this Bill is selective. The Bill establishes a broad framework for surveillance of prices set by corporations and public authorities, but the selection of goods and services subjected to surveillance will focus on areas where effective competitive disciplines are not present and where price or wage decisions have pervasive effects throughout the economy. Generally, both conditions will have to be met before a body is made subject to surveillance.

As a result, the great majority of Australian businesses will not be subject to surveillance. In deciding which industries or bodies need to be covered the Treasurer will consult with the Authority which, in turn, will liaise with the Trade Practices Commission as appropriate. This will be one of the first tasks of the new authority. Initially, the new Authority will undertake surveillance of wholesale petroleum product prices which is presently carried out by the Petroleum Products Pricing Authority. The latter Authority will be abolished by the present Bill. In addition major Commonwealth public authorities will where appropriate be subject to surveillance. We intend that Telecom Australia and Australia Post will be brought under surveillance from an early stage in respect of their principal charges, subject to suitable directions to the Authority regarding the matters to which it should give special consideration when examining those charges.

The Bill does not apply to State authorities. However, as pricing guidelines are developed for application by the Authority, particularly in relation to public sector prices, we will consult with the States on the desirability of major State authorities observing similar guidelines. The Government intends that other Commonwealth authorities that are not directly subject to surveillance should also apply those guidelines where appropriate to their own pricing or price regulatary decisions.

As with the present Petroleum Products Pricing Act and the former Prices Justification Act, there are no penalties in the Bill for failure to comply with the Authority's findings. Penalties attach only to failure by declared organisations to observe the required procedures for the notification of price increases or for the provision of information and evidence, or in relation to the freezing of prices during inquiries.

The Government expects that bodies subject to the Authority will abide by its decisions. While compliance will be voluntary, consistent with the consensus approach on which the prices and incomes policy is based, the force of public opinion and companies' recognition of their public responsibilities will be powerful factors ensuring compliance with the findings of the Authority, as past experience here and overseas indicates.

The Government does not wish to inhibit normal business operations. Every effort has been made to keep the costs of surveillance to business to a minimum. The Bill itself, which affects the rights and interests of individuals, is of necessity somewhat detailed. But our intention is, as far as possible, to keep the procedures simple, speedy and non-legalistic.

Turning to the main features of the Bill, its broad thrust is, as I have indicated, to provide a capacity for price surveillance and inquiry which will be exercised selectively and with an emphasis on reducing as far as possible the amount of legalism in procedures.

Thus, whilst the ambit of the Bill includes the supply of any goods or services by foreign, trading and financial corporations and Commonwealth authorities, referred to as 'persons' in the Bill, the notification procedures will apply only to those goods or services and those persons that have been declared under section 21. Declared persons supplying goods or services will be required to give prior notice of a price increase and to wait a statutory period before implementing the increase.

The authority will normally have 21 days to examine a proposed increase, although this period may be extended with the consent of the notifying person. Where the authority objects to a proposed increase it will be able to suggest a lower increase to the person concerned or, where necessary, recommend an inquiry .

Whilst the notification procedures will apply only to declared persons, the Authority will be able to inquire into prices charged by any person subject to the Act and will be able to conduct general price inquiries not necessarily tied to the justification of prices charged by a particular supplier. Inquiries, however, will only be held at the direction of the Treasurer or with his approval.

The Treasurer will also determine limits for the duration of inquiries, which will generally be no longer than three months, and he will be able to direct the Authority regarding the conduct of inquiries and matters to be taken into consideration.

Where an inquiry relates to the supply of goods and services by particular persons, prices charged by those persons will be frozen during the course of an inquiry, subject to a provision empowering the authority to grant interim price increases.

Reports on inquiries will be made public, as also will the outcomes of price notices dealt with outside of inquiries.

Selection of areas and persons to be brought under price surveillance will be by the Minister, or by the Authority subject to the approval of the Minister. The Bill does not stipulate criteria for selecting goods and services or persons for surveillance. I have already made clear, however, the principles on which that selection will be made.

The Bill incorporates legislative guidelines which require the Authority, in exercising its powers and performing its functions, to have particular regard to the following matters:

(A) the need to maintain investment and employment including the influence of profitability on investment and employment;

(B) the need to discourage a person who is in a position substantially to influence a market for goods or services from taking advantage of that power in setting prices; and

(C) the need to discourage cost increases arising from increases in wages and changes in conditions of employment inconsistent with principles established by relevant Industrial Tribunals.

These guidelines will ensure that the Authority's approach to price surveillance both conforms to and supports the Government's broad economic strategy. They are subject to any additional directions that the Minister may give to the Authority under Section 20.

The overwhelming majority of unions have undertaken to comply with the new wage indexation guidelines by undertaking to make no extra claims during the currency of the wage system. We are heartened by this development. However there is also a need for a comparable supportive mechanism on the employers' side. Section 17 (3) (C), which I have just quoted, provides this by requiring the Authority to have particular regard to the need to discourage cost increases arising from settlements that are inconsistent with principles established by relevant Industrial Tribunals.

This approach thus places an obligation on business to comply with the wages side of the prices and incomes accord which matches the commitments already given by the overwhelming majority of unions. The Government recognises that, where a company has clearly and strongly resisted attempts at breaching the wage system, it should not be subject to a second possible penalty and in these circumstances it is not intended that the Authority would disallow cost increases. If necessary, where it is clear that a company has taken all reasonable steps to resist a breach, a ministerial direction under Section 20 will be issued to the Authority that the resulting cost increases should not be disallowed. But where a company has not so resisted, or has offered wage or other increases to suit its own purposes in disregard of the national economic interest, it cannot expect that the costs involved will be accepted by the Authority as justification for price increases.

As I have already indicated, the legislative guidelines under Section 17 (3) are supported in the Bill by a provision (Section 20) for ministerial directions to be given to the Authority. This will ensure that the operations of the Authority remain within the framework of Government policy, including Government policies on pricing by Commonwealth authorities.

This provision will also allow, upon ministerial direction, the Authority to have particular regard to other matters which may be of special concern, such as the use of non-market transfer pricing, if there were indications that these were being used to circumvent the intentions of the prices and incomes policy.

The Authority will consist of a Chairman and three other members who may be appointed on either a full time or a part time basis. Whilst the members will not be representative of particular interests, it is intended that one of the members will have a background in the trade union movement and another in business. The Bill provides for the appointment of associate members for the duration of particular inquiries. This will enable the authority to be assisted where necessary by persons who have special expertise in areas subject to inquiry.

The Authority's secretariat will be located in Canberra but, as a transitional arrangement, staff of the Petroleum Products Pricing Authority, whose operations will be subsumed by the new authority, will remain in Melbourne as a branch of the Authority. The Bill provides for repeal of the Petroleum Products Pricing Act and for transfer of the records of the Petroleum Products Pricing Authority and the former Prices Justification Tribunal to the new Authority. Provision is made in the Bill to protect information and documents provided to the Prices Surveillance Authority.

Establishment of the Authority will add only marginally to Budget Outlays in 1983-84 but its operations are estimated to cost around $1.5 million in a full year. This estimate is based on the proposed coverage of major Commonwealth authorities and assumes some increase in surveillance in the private sector beyond the present surveillance of oil company prices by the Petroleum Products Pricing Authority.

I commend the Bill to the Senate.

Bill (on motion by Senator Chaney) adjourned.