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Tuesday, 10 September 1985
Page: 341

Senator SHORT(4.25) —I am pleased to be participating in the debate today, on the matter of public importance which states:

The disastrous consequences of the Government's wages pact with the Australian Council of Trade Unions for interest rates.

The Opposition has brought forward the matter of public importance to highlight the great damage the Government's cowardly and continual kowtowing to the trade union movement is doing to this nation. Before turning to that matter I shall mention a couple of comments made, first of all, by Senator Walsh, and then by Senator Siddons. Senator Walsh talked about the economic growth in this country in the last two years and the reduction in the rate of inflation. In effect he praised the Government and gave it credit for those results. Let us look at some of the facts. Certainly, inflation is down compared with that of two years ago but it is not down relative to the inflation rate in other countries around the world. We have an inflation rate which is almost twice that of the Organisation for Economic Co-operation and Development average. That figure above the OECD average is higher than that occurring during the years of the previous Government. Our balance of payments deficit proportionately is the largest of all countries in the Western world. In the last 12 months our currency has depreciated by more than any other currency in the OECD and, despite what Senator Walsh said, our interest rates in real terms are the highest of any country in the Western world and are higher than they have been in this country for 50 years. I will come back to that later.

So much for some of the `facts' that Senator Walsh produced. It is true that economic growth as measured by the gross domestic product figures has been higher in the last two years. It has been good. Senator Walsh omitted the reasons for this, which have been spelled out by Opposition spokesmen over the last couple of years. They have also been acknowledged by people such as Senator Walsh's predecessor as Minister for Finance, Mr Dawkins. He acknowledged honestly last year when he was Minister for Finance that the recovery in the economy since the Australian Labor Party came to office was due essentially to three factors: First, the breaking of the drought in 1983, secondly, the recovery overseas and, thirdly, the wages freeze that the previous Government-and the now Leader of the Opposition, Mr Howard-introduced in 1982 which laid the framework for much of the recovery that has since occurred.

Senator Walsh also omitted to mention that,although one of the reasons for the difficulty that the Australian economy faced in the late 1970s and the early 1980s was that it was part of a worldwide recession, the problem went deeper than that for Australia. We were still living through the problems of the 1970s, not just those occasioned by the Whitlam Government but, more importantly, the problems occasioned by the actions of the Australian Council of Trade Unions throughout the 1970s when it was led by the now Prime Minister, Mr Hawke. The chickens came home to roost in the late 1970s and 1980s. Those chickens were hatched by the ACTU and, primarily, by the now Prime Minister, the then ACTU President, Mr Hawke. So much for some of the things that Senator Walsh said.

Senator Siddons made some interesting comments. I am not sure that I followed him too well because in one sentence he was castigating the Opposition for not having a policy and in the next sentence he was proposing policies which were, and are, those of the Opposition. I agree with Senator Siddons that there are no easy solutions to the problems that we in Australia face today. But there are some things we can do. First, we have to make ourselves competitive as a nation. The only way to do that is to act more responsibly and to realise that we are going broke following the Government's policy course at the moment. We cannot afford the policies that are being undertaken. That is the essential reason why we have difficulties and for the lack of competitiveness that we now face.

What do we do about this problem? As a government we would do several things. We would take a responsible and tough attitude to government spending because if we did not the problem would continue to compound. Therefore, we take a tough approach to taxation, which flows from the Government's spending approach. We will see later in the month what proposals the Government will be putting forward. They will put more and more burdens on the taxpayer, particularly the productive sector of the economy and the small business sector, through capital gains tax and other forms of tax on business. These are the sorts of things that we have to avoid doing if we want to make this country grow and make it competitive. We have to take a firm hand on monetary policy. In the last 18 months, monetary policy has blown out. It is out of hand. Monetary targeting has been abandoned by the Treasurer (Mr Keating) because it all got too hard and he and the Government were not prepared to take the tough decisions that are necessary to have a proper monetary policy.

The final thing that we have to do-Senator Siddons alluded to it but did not seem prepared to come all the way with the Opposition-is to break the yoke of regulation of the labour market. We have to make the labour market more flexible. We have to do the sorts of things that Senator Siddons suggested and talk about and develop the sorts of policies that have been Opposition policies for the last 12 months or more. We have to make agreements that are legally enforceable. I agree with Senator Siddons, but he is not saying anything new. He is reiterating the policies of my Party. So much for some of the things that have already been said.

I now come back to the matter of public importance. Our wording of the matter of public importance is framed in terms of the effect of the wages deal on interest rates. I will concentrate my remarks on that point, but the Opposition could just as validly have worded this matter of public importance to highlight the disastrous consequences that the Government's capitulation to the ACTU last week will have on inflation, economic growth, employment, our balance of payments and the value of our dollar. It is not possible to separate these different elements. They are all closely interwoven.

Let us look at the content of the deal struck last week between the Government and the ACTU, a deal which is breathtaking in its arrogance. It circumvents the authority of the Australian Conciliation and Arbitration Commission. It pre-empts the outcome of the present wage case and subsequent wage cases when the Commission might have had other ideas, ideas which it was created and paid to have, about possible ways to proceed. All those were pre-empted by the deal last week between the Government and the ACTU which gives full wage indexation in the current national wage case without any discounting for the depreciation of the Australian dollar.

There is to be a 2 per cent discounting-and that is questionable when one looks at the fine print-in the April 1986 wage case. In exchange for this so-called sacrifice by the unions there is to be a compensatory tax cut in September 1986 and support for the ACTU's productivity claim, though reduced from 4 per cent to 3 per cent, in the form of compulsory superannuation by all employers. There will be unspecified tax reform. We will wait until later in the month for that. Additional price restraints will be imposed on businesses because the Treasurer and the Minister for Employment and Industrial Relations, Mr Willis, say that profits are now back to the level of the early 1970s, and that is as high as they ought to go. This ignores completely the fact that the profitability of the corporate sector in the 1970s was far lower than in the 1950s and the 1960s which were the decades that really saw growth in this country. Yet that is written into the agreement that Mr Keating and Mr Willis released last week. So there will be a tougher approach to business and acceptance of a union proposal for a capital goods investment strategy. I understand that that proposal is quite contrary to the views of the Government and, in particular, its Minister for Industry, Technology and Commerce, Senator Button. Above all that, there has been the granting at long last of the Australian Council of Trade Unions' dream of full superannuation, regardless of the cost to the nation.

That is an extraordinarily generous package. It gives the unions, as I said, one of their more cherished objectives-full national superannuation. It gives a permanent tax cut to compensate for a temporary deferral of part of a wage increase. It is an extraordinarily generous package for the unions, but what sort of a package is it for Australia? For Australia it is an extra- ordinarily bitter package because it virtually guarantees an acceleration in inflation, further depreciation of the dollar, a slowing in economic growth and a reduction, if not an actual downturn, in employment growth. The Hawke Government, through its agreement last week with the ACTU, has once again become an accessory to the crime of job destruction. Of course, the package guarantees what is the main subject of this matter of public importance; that is, a further hike in interest rates in Australia and their maintenance at and increase beyond the highest levels for 50 years. Our interest rates, when adjusted for inflation, are the highest since the Great Depression. They have been at record levels since earlier this year. They have increased further in recent days and they are now, as a result of the wages deal, destined to go to new record heights over the months ahead.

Who is it that gets hurt by high interest rates? The people who get hurt by high interest rates are the individuals, ordinary Australians, particularly those on lower and middle incomes who have to borrow funds to purchase the things they want in life-not the luxuries of life but the necessities and the semi-necessities. They are the people who are hurt by high interest rates. They are the people who have struggled for years to try to buy homes and who are now finding homes put out of their reach and who, if they want to buy a car or the essentials of life, have to borrow money for it as they cannot otherwise afford to pay for it. Individuals, including home buyers, are the people who are hurt by the policies of this Government leading to this high interest rate structure.

The other group in the community which is most hurt is small business. Large business can generally, in one way or another, live with high interest rates because, important though they may be, they are a less significant element for it in its total operations. It is the small businessman who runs his business on overdrafts and who never or rarely has enough capital to be on the right side of the ledger in cash terms who will be the sufferer and is the sufferer under this high interest rate regime into which we have got ourselves. The reason we are in this regime, as I have said, is the gross economic mismanagement of this Government over the past 2 1/2 years. The Government cannot wash its hands of the interest rates issue. It has compounded any upward influences on rates. It has done so blatantly, deliberately and decisively and it has also done it in defiance of its own statements. Surely we all remember that during the last election campaign both the Prime Minister and the Treasurer said that interest rates would fall in 1985.

The ACTING DEPUTY PRESIDENT (Senator Elstob) —Order! The honourable senator's time has expired.