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Thursday, 7 November 1985
Page: 1703


Senator MESSNER(11.07) —There probably can be no better demonstration of the problems that exist in the Australian economy today than the front pages of this morning's newspapers with their continuing reports of the falling of the price of the Australian dollar in overseas terms. In the last few days we have seen a collapse of confidence in the Australian dollar from around a level of US70c to around US64 1/2c. On a trade-weighted index basis, which measures the Australian currency against the currencies of such great trading nations as Japan and Western Germany, one sees that the currency has collapsed even faster. Now, as of yesterday, the Australian dollar in trade-weighted index terms has been selling below the index number of 59.3. Surely this must give every Australian cause for concern. The reasons are quite clear, and this takes us right to the core of the economic management of this country under the Hawke Labor Government.

Perhaps the figures are even more dramatic if we look at what has happened to the Australian dollar in US dollar terms since this Government came to power in March 1983. At that time the Australian dollar would buy 95c American. We all know what has happened successively. There have been falls in the value of the Australian dollar over the past two years to the point where it reached the then lowest point of 65c, a collapse of some US30c, around April of this year. It will be recalled that the reasons for that collapse were reasonably proximate. One recalls that they were to do with a collapse of confidence in the Hawke Government and its approach to things such as our relationship with the United States, the MX missile furore, the Public Service industrial dispute, concessions to the New South Wales doctors, and the Caucus rejection of the reintroduction of tertiary fees. All those things had bearings on the price of the dollar at that time. Since then the currency has just been sliding along in a narrow channel of around US66c to US70c, until we have reached the current situation which this week has seen the bottom fall out.

Clearly there are reasons for this. The Treasurer, Mr Keating, has been overseas this week saying to the nations of the world that all is well with the Australian economy, that we have got wage costs under control, that things are going along well, that the growth rate in the Australian economy is 5.5 per cent and is faster than that of our trading partners. That might be very much so on the surface, but we need to look below the surface and examine how this has come about. The Government has prided itself on a high growth rate policy. The fact is that that high growth rate has been encouraged by the creation of more and more overseas debts by government, and of course by private firms as well. These are best exemplified by the fact that since the Hawke Government came to power the external debt of Australia has grown from $36.5 billion in the financial year ended 30 June 1983 to $68.5 billion. In other words, our foreign debt-debts owing to banks overseas and to governments overseas-has almost doubled. That creation of debt can be best exemplified as something akin to a family which, because its members feel their incomes are falling, decides that in order to maintain its standard of living it will borrow more. So the family goes to the bankers or finance companies and borrows more and more money, paying higher and higher rates of interest as its credit rating falls in such a way as it can spend that money it has borrowed to keep up its standards of living. That is an exact analogy with the situation Australia is in today. We are borrowing increasingly more and more money in order to fund growth in this economy. Mr Keating goes about telling the world that this is of great consequence, that this is a great achievement and that we are improving our position in the world. The fact is, of course, that that is quite unreal. The Australian dollar is showing that it is quite unreal because the rest of the world is valuing the Australian dollar down and selling it down very heavily in the overseas markets.

If the Australian Government does not understand what is happening, the overseas markets do. They can see that there are gross problems with the Australian economy and consequently they are selling down Mr Keating's confidence very cheaply indeed. Probably the whole exercise of the last week has not been helped at all by Mr Keating, in a panic driven way, dashing overseas to make a speech to businessmen and bankers in New York City in order to give some confidence in the Australian currency. In fact, it appears that all his utterances have created greater doubts about the Australian currency and caused a further collapse in the Australian dollar.


Senator Sheil —Isn't he the world's greatest Treasurer?


Senator MESSNER —Yes, he is supposed to be the world's greatest Treasurer, but every time he goes overseas he causes a rundown of the Australian dollar. Surely we ought to be pleading with the Prime Minister (Mr Hawke) to try to keep Mr Keating home so that at least we can keep some semblance of confidence in the Australian economy. We should be saying: `Send him home before he wrecks the Australian economy in the eyes of overseas nations'.

The other issue which coincided with Mr Keating's overseas visit was the announcement this week of the rubber stamping of the accord reached between the Government and the trade union movement which resulted in a 3.8 per cent wage increase for Australians. We know that this wage increase was agreed in a sweetheart deal under pressure from the Australian Council of Trade Unions on the Government at a time when the country simply could not afford it. This is at a time when Mr Keating, the world's greatest Treasurer, Mr Willis, the world's greatest industrial relations expert and Mr Hawke, the world's greatest Prime Minister, are telling Australians that this accord is the greatest thing since the invention of the internal combustion engine. In fact, the accord is providing a means by which the union movement can impose its will upon the Australian nation through this Government because this Government is totally beholden to the trade union movement. Through the accord, it is tied feet and hands to the trade union movement and that pressure, which will continue to be exercised by the trade union movement through the accord, is nothing more than a confidence trick against the Australian people. If the Australian people are not in the streets complaining about this now, they certainly will be.


Senator Robertson —Get back to pensions, you do a better job at that.


Senator MESSNER —Thank you very much, Senator Robertson. Let us just examine a little further the problem of wages in this country. Honourable senators know full well that the 3.8 per cent wage increase could not have been afforded and discounts should have been made for the effects of devaluation of the Australian dollar. But no, this Government had to take the word and the pressure from the trade union movement and look down the track another year before it even started to consider taking off wage discounting through the Arbitration Commission. That will not happen at least until April or May. On the other hand, the Government says: `even if that happens, we will give you a tax cut anyway.' This will be paid for by some kind of assumption that growth will continue in the economy. As I said earlier, that growth will be kept up at any kind of level, as it has since this Government came to power, only from more and more overseas borrowing. We are mortgaging ourselves into the future by this Government's simple proposition that we need growth and we will spend what we have not got in income by borrowing more and more overseas in order to keep up our standard of living. It clearly demonstrates the problem that this country will face by the time the next Liberal government comes to power in December 1987. By then this chaotic Government will have wrecked this nation and we will have to set about the task of rebuilding it again.

Let us have a look at the wage structures as announced by the Government in the last few days. On 4 November we saw the announcement that there was to be an approximate increase in wages for the average wage earner of $15 a week. That will add to the costs of people in this country-the cost of living and the cost of every good and every service that we buy-a total of $4.2 billion in this financial year. This Government is asking Australians to pay that bill; it is asking Australians to pay an additional $4.2 billion arising out of this wage decision. As we have demonstrated, that decision has been read overseas as an absolute disaster. Coming on top of the absolutely destructive visit overseas by Mr Keating, this has been one of the major reasons why we have seen the Australian dollar collapse. We have demonstrated that the loans that have to be raised overseas are causing more and more problems with repayments. More and more repayments will be demanded from the Australian Government's budget. Already these repayments have reached $7,000m a year. In fact, we are paying more now overseas for the repayment of loans and interest than we are spending on defence, health or education. This is to pay for what the Hawke Government claims to be growth at higher rates in the economy. Are we living beyond our means? The simple answer is yes, and this Government needs to address itself to the fundamental problems of the economy in order to ensure that confidence is rebuilt in the Australian dollar and in the economy to the point where real jobs can be created and we can put people back to work.

One of the ways in which the Government has been seeking to ensure that the Australian dollar does not collapse right through the floor is to keep interest rates high. It is a deliberate part of this Hawke Government's policy, forced upon it by its inadequate approach to the economy as a whole, to make sure that interest rates are kept at the highest levels. Every day more and more evidence becomes available which demonstrates that interest rates are soaring. New home buyers are finding it more and more difficult to borrow money in order to buy their homes. Not only can they not get as much money as they might need to buy a house, but also every time they borrow they are forced to accept a contract in which their interest rates are going higher and higher.

This situation is getting worse because the savings banks are running out of money and the growth rate of their deposits is falling dramatically. The figures announced only a few days ago show that the annual growth rate of savings bank deposits declined to 7.3 per cent in September. Yet that compares with a growth rate in the money supply, which is worrying in itself, of 16.1 per cent across the economy over the same period. So savings banks, the main source of housing finance, are not getting anything like their fair share of funds. This can lead to only one conclusion: Fewer and fewer people will be able to borrow sufficient money to pay for a new home. It also means that the interest rates they will pay in respect of those loans will get higher and higher and, consequently, squeeze even further families which will have their disposable incomes pressured by the higher repayments they have to make to banks and building societies. Is it any wonder that Australians feel their living standards are slipping under this Government? Their mortgages are rising but, if that is not happening immediately, banks, building societies and other financial institutions are extending the period over which people have to repay their loans. Having taken out a loan for, say, 20 years, as some people may have done in recent times, they will find that, involuntarily, the term of the loan will have been extended to 29 or 30 years. That means that the evil days of having to repay the mortgage will be extended into the future. Of course, this will affect their living standards. At the end of their working lives they would expect to have repaid the mortgage on their homes and to have a bit of extra money, because of not having to meet repayments, perhaps to take a trip overseas with their long service leave. Instead, they will find that they will have to continue to repay their morgages indefinitely. So that the little bit of cash that they might have been able to accumulate after repaying the mortgages will not be there. The effect of that on the living standards of Australians will be significant and will continue to grow as a result of the Hawke Labor Government's determined policies to keep interest rates high.

This Government has no choice, in order to keep the Australian dollar under some kind of control, but to keep interest rates high. While the Government is committed, as it is, to a firm policy of the so-called accord with the trade union movement, which locks the Government into doing whatever the ACTU says should be done, this pressure on Australian families will continue. The Labor Government's sell-out to the ACTU will put a tremendous cost upon Australian families in the years ahead as their living standards fall. This is the conscious policy of this Government. It is obvious why it is committed to this policy; it is because of its relationship with the trade union movement. As was acknowledged earlier, the trade union movement is getting all that it wants by virtue of the accord and the Government's craven submission to the unions' demands. This ensures that the future will not be very bright for Australians, at least until they have a chance to re-elect the next Liberal government. That is something which we have to address urgently.

The falling dollar and growing inflation will obviously feed more and more into the price of goods. In turn, because of the unions' relationship with the Government, they will feed more and more into the cost of goods and services which in turn will be transformed into rising wage levels, leading to more inflation and thus into a vicious circle of an increasing cost of living, a slipping standard of living and, consequently, more devaluation of the Australian dollar. It is a vicious circle which this Government appears to be incapable of handling. It has no policies to redress it. The problems are a direct result of the failure of the Hawke Labor Government to address the fundamental issues in the economy. How it can deem that it is on the right track and claim that Mr Keating is the world's greatest Treasurer is beyond me. It is interesting to note that more and more commentators in the Press are saying exactly that.


Senator Peter Rae —They are now calling him the world's greatest discredited Treasurer.


Senator MESSNER —I thank Senator Rae. It is very useful to remind ourselves that he is now probably the most discredited Treasurer in the world, having fallen from his star-like position very much more quickly than has the Australian dollar over the last eight or nine months. It is interesting that the editorial in today's Australian Financial Review states that the decline of the Australian dollar is not simply a matter of misplaced pessimism but is a response to deeper structural problems including the labour cost factor and unless we adapt to international realities our currency will end up as valuable as monopoly money.

That precisely sums up the current situation. We have to recognise that to our north are developing economies of great power and enormous potential. Malaysia, Singapore, Hong Kong, Taiwan and Korea have enormous potential for growth. They are efficient, well structured in a technological sense and have huge opportunities to create jobs for their citizens. That potential is not being matched by developments in the Australian economy; in fact the reverse is true. Effectively, the falling dollar and the subsequent round of inflation that that will induce are exporting jobs to those countries. Unless we can start to meet the challenge of the emerging powers of Asia, clearly this country will become the cheap white trash of Asia. It is important that we address that here and now because the decisions that we take now will have an effect on all of us, including our children, for the next generation. We must take these decisions now and face the hard questions that are before us. The accord effectively puts off the evil day. While that is happening, the Australian community is not getting ahead.

I venture to suggest that, if a poll were taken today, Australians would say that they are worse off than they were a year ago. This is a result directly of the Government's weakness and failure to address fundamental issues. I refer not just to the issue of taxation for which this Government claims great credit, but in which it has been an absolute failure, in terms of its actions to change the tax system. I refer more to the fundamental issue of how labour relations are conducted in this country. Cost structures can be established in such a way as to create jobs and in that way develop the best possible opportunities for industry. Alternatively, one can adopt the methods that this Government has adopted by which industry is held to ransom by the trade union movement in collusion with the Government.

It is that central issue that is starting to seep through not only the minds of Australians but also those of our industrial companies. More and more concern is being expressed about the expansion of our wage structure. Companies in Australia are almost unanimous in their disapproval of the announcement of the 3.8 per cent wage increase last Monday. That clearly shows that industry is now realising that something fundamental has to be done about our wage structure and that the accord is really only just a means of putting off the evil day.

Every time we buy goods overseas, the goods which cost, say, $100 two to three years ago, today cost about $155. We are finding significantly that we have to spend more to buy overseas made goods or to import equipment which can re-establish our industrial base and make it more efficient. The cost of everything in this country relative to the cost overseas has gone out the window to the tune of nearly 55 per cent since this Government came to power. That is the reality of the situation. Industry in this country is starting to appreciate that and is doing something about it. It is opposing more and more the wage decisions of the Conciliation and Arbitration Commission. Consequently, this Government will be under more and more pressure to look closely at the accord and at the options and alternatives being put forward by the Liberal and National parties which aim to provide for more flexibility and less rigidity in the wage structure. Individual companies will be able to make decisions and work with their employees in a co-operative manner to ensure that the employees' jobs are maintained and enhanced, through the development of the industry hand in hand with those employers.

The classic case at the moment in which this has occurred is the Mudginberri abattoir dispute. In that case a small abattoir in the Northern Territory developed a new market overseas for buffalo meat. It made arrangements with its own group of employees for them to be paid wages at levels which were far in excess of the union award rates. Of course, as a result their productivity was significantly rewarded. Because of the lower unit costs generated by that productivity, the abattoir was able to sell more and more meat on the world markets. As a result it expanded job opportunities and improved the job security of its employees. But along came the trade union, which saw that the employees were not working for union wages. They were in fact getting more than the union rate. It said: `We cannot have that. You must work for lower wages and in accordance with the requirements of the union'. Consequently the little abattoir in the Northern Territory was picketed, its activities ceased, and the potential for job creation in the area was destroyed, all as a direct result of trade union activity, hand in hand, no doubt, with the Government.

That is the kind of destruction, the kind of absolute nonsense and stupidity, with which we are faced because of the pressure that is imposed on this Government by the trade union movement. Those are the fundamental questions that must be addressed in this country. We must allow our industrialists to develop their markets, to improve productivity, to work hand in hand with ordinary workers to ensure that their jobs are made more and more secure and that, if possible, their wages are greater than union award rates, so that as individuals they can improve their financial security and thus their financial independence. That is what the Liberal Party stands for. That is the kind of wage policy we want to develop in this country and which represents the radical reforms that are necessary in order to cure the fundamental problems which this Government refuses to acknowledge.